gjensidige.com ANNUAL REPORT 2010

gjensidige.com ANNUAL REPORT 2010

EVENTS 2010 THIS IS GJENSIDIGE January March April May June October December The year began with a cold winter, which affected the insurance results for the first quarter. Gjensidige established its own customer ombudsman. Gjensidige entered into an agreement concerning the acquisition of Nykredit Forsikring in Denmark. The general meeting decided to convert Gjensidige into a public limited company. A dividend of NOK 1.65 billion was adopted for the 2009 financial year. For the first time since it started up in 2007, Gjensidige Bank reported a profit before tax in the first quarter of 2010. The conversion of Gjensidige into a public limited company was carried out at the end of June. It was decided that Gjensidige s head office would be moved to a new building on Schweigaardsgate in the centre of Oslo. The new building shall be ready in the fourth quarter of 2013. The Norwegian Automobile Association (NAF) announced a break with Gjensidige after nearly 40 years of cooperation. Gjensidige applied for listing on Oslo Børs (the Oslo Stock Exchange). Gjensidige was listed on Oslo Børs on 10 December. In connection with the listing, the Gjensidige Foundation sold nearly 40 per cent of its shares. FINANCIAL CALENDAR 2010 27 April General meeting 12 May Q1-result Silent period starting 14 April 11 August Q2-result Silent period starting 14 July 10 November Q3-result Silent period starting 13 October

gjensidige annual report 2010 1 2 this is gjensidige 2 An historic year 4 Values and vision 6 The markets 8 Preserving security 10 Financial key figures 11 Non-financial key figures 12 Goals and strategy 14 34 operations 15 Operations 16 General insurance Private 18 General insurance Commercial 20 General insurance Nordic 22 General insurance Baltic 24 Pension and savings 26 Online retail banking 28 Health care services 30 Asset management 32 Additional information perspective perspective this is gjensidige 35 Employees 38 Gjensidige and the society 41 The Gjensidige foundation 42 58 governance 43 Management and control 45 Solvency II 46 The Gjensidige share 48 Corporate governance 54 Group Management 56 Supervisory board, Control committee and Nomination committee 57 Glossary results 59 Report of the Board of Directors 78 Consolidated accounts 148 Parent company accounts 195 Declaration of the Board and CEO 196 Auditor s report 198 Statement by the control Committee 199 Statement by the supervisory Board

2 gjensidige annual report 2010 An historic year In June 2010, Gjensidige was converted from a mutual company to a public limited company. The subsequent stock exchange listing on 10 December marked the beginning of an exciting new epoch in our nearly 200-year-old company history. At the beginning of 2011, Gjensidige has emerged as a modern, stockexchange-listed general insurance group with a leading position in Norway and a number four position in the Nordic countries. During the last decade, Gjensidige was transformed from a group of co-operating mutual companies and mutual fire insurers into a modern general insurance group. Substantial value has been created and manifested under way, and starting in 2007, an ambitious dividend policy has helped ensure that substantial amounts of the value added have been paid as dividends to our owners. The profit for 2010 provides the basis for still another substantial dividend to our owners. Despite a cold winter at the beginning of the year with major claims payments after frost damage, the insurance profit for the year as a whole was adequate. The result for our banking operations ended up as a profit for the first time since starting up in 2007, and the pension and savings operations are on track to achieve their target of a profit before tax starting in 2011. In addition, the financial market has contributed to a good profit in our investment operations. General insurance operations are and will continue to be the core of Gjensidige. In order to support the Norwegian general insurance operations, banking, health and pension and savings products are also offered in the Norwegian market. These are relation-building products that help improve customer loyalty. Starting in 2006, the operations were expanded to also include general insurance in Denmark, Sweden and the Baltic States. These foreign investments shall mainly contribute to the Norwegian general insurance operations through economies of scale. The acquisition of Nykredit Forsikring in Denmark in the spring of 2010 was a significant expansion of our Nordic operations and has turned Gjensidige into a major player in Denmark with a market share of around six per cent. This acquisition also signifies a breakthrough for our Nordic and Baltic strategy. About 25 per cent of the general insurance revenues now come from foreign operations.

gjensidige annual report 2010 3 Gjensidige has met new needs and requirements from the society and customers with pro-active measures. Through focused customer orientation, the Group has adapted the distribution to altered customer behaviour. The Group currently has a unique strength in Norway. We can only ensure satisfied customers in the future as well through continued simplification and improvement. This makes great demands on continued innovation with regard to places where we may meet the customers. This is where our continuing efforts to promote customer orientation and our efforts to create the right Gjensidige experience are important. A dizzying technological development is going on all around us. A few years ago, who could have foreseen the exciting opportunities that are offered through new mobile platforms for interaction between us and our customers? E-readers such as Ipad and its competitors are sold in substantial quantities in Norway as well. This is an example of how rapidly and intensively our customers adapt to new trends and change their customer behaviour. Gjensidige s employees are distinguished by a high level of expertise, the ability to implement changes and a stamina that earns them much respect. There is every reason to thank the individual employee for the efforts that have been made and that have created the overall profit for 2010. In connection with the stock exchange listing, nearly fifty per cent of the employees in Norway, Sweden and Denmark became shareholders in the company. This testifies to their loyalty and their great faith in the Company. Efforts to further develop the skills of managers and employees have been and continue to be an important and necessary measure that will not become any less important in the coming years. Competent employees are extremely important in order to ensure satisfied customers, regardless of the situation or event that brings them in contact with employees in the Group. Therefore, we have intensified our efforts to provide further internal education and training and established the Gjensidige Academy. The Academy has overall responsibility for both management and employee development. After train ing and an examination, 460 of the Group s salespersons and advisers were approved or authorised in various roles. Gjensidige shall arrange matters as favourably as possible, but regardless of his/her position and role, the individual employee must take independent responsibility for developing his/her own knowledge and improving the skills that are required. After the successful stock exchange listing in December 2010, Gjensidige faces the future with about 50,000 new shareholders behind them. For Gjensidige, this is a new interest group whose expectations and demands will further hone our skills. The biggest owner is the Gjensidige Foundation, which in addition to exercising active ownership in the Group, will also pass on dividends from Gjensidige to our Norwegian general insurance customers. This is a unique model, which together with the Foundation s charitable activities will help attract considerable attention to the Watchman in the Norwegian market. The Group has ambitious return and profitability requirements, which will require a focused further development and further modernisation of the whole Gjensidige Group. We must have standardised processes and comprehensive solutions that apply across national boundaries and in all of our business areas. The Group must emerge as one Gjensidige both in Norway and abroad. Gjensidige has targeted a clear objective of achieving a combined ratio between 90 and 93 starting in 2011. This objective requires a continued strong awareness associated with developing cost-effective solutions in all of our business areas. In order to achieve the profitability targets that we have set ourselves, we must also be able to correctly price the risks that we assume through our insurance activities. This calls for a further development of our systems for risk assessment and pricing. The Group s new status as a listed company does not signify any change in the long-term goals of being a profitable, leading, customer-oriented general insurance company in the Nordic market. Gjensidige will be an active participant in the ongoing structural changes that will occur in the Nordic general insurance market in the coming years. One necessary condition for participating actively is access to necessary capital. The stock-exchange listing has given the Group a security that can be used in acquisitions or in other ways of financing profitable growth. perspective this is gjensidige

4 gjensidige annual report 2010 values and vision Gjensidige is a sound Norwegian financial group and one of the leading players in general insurance in the Nordic countries. Gjensidige offers general insurance products in Norway, Sweden, Denmark and the three Baltic States. In addition, it offers banking for private persons, pensions and savings products and health care services in Norway. operations Vision The operations are divided into seven business areas. These are described on pages 20-43: general insurance private Norway general insurance Commercial Norway general insurance Nordic general insurance Baltics pension and savings online retail banking Health care services General insurance is the Group s core business. Gjensidige is one of Norway s best-known brands. Both the company logo and the Watchman have a high recognition factor. The roots of the general insurance operations can be traced back to the 1820s, while the Watchman has been the trademark for insurance business for more than 75 years. 2007 and 2008 saw the launch of the Watchman logo in the other countries where Gjensidige offers insurance products. The Group s health care service has been branded Hjelp24. We shall know the customer best and care the most! GJENSIDIGE FORSIKRING ASA Gjensidige Bank ASA Gjensidige Pensjonsforsikring AS Gjensidige Investeringsrådgivning ASA Gjensidige Forsikring ASA Tennant Försäkringsaktiebolag AB Gjensidige Forsikring ASA AS Gjensidige Baltic Hjelp24 AS Norway Norway Norway Danish branch Sweden Swedish branch Latvia Norway Gjensidige Bank Boligkreditt AS Gjensidiges Arbejdsskadeforsikring A/S * Nykredit Forsikring A/S * Tennant Forsikring NUF Lithuanian branch Estonian branch Norway Denmark Denmark Norway Lithuania Estonia Banking Pension and savings General insurance and white label Health The figure shows principal operational subsidiaries and branches in Gjensidige * Gjensidiges Arbejdsskadeforsikring A/S and Nykredit Forsikring A/S are owned by Gjensidige Forsikring ASA, but run by the Danish branch Owned through holding company Branch Subsidiary

gjensidige annual report 2010 5 The Gjensidige Experience Gjensidige is one of the strongest brands in Norway in any business sector. Gjensidige shall develop this brand strength further as the brand becomes a more significant Nordic and Baltic player. Through its brand building, Gjensidige shall develop a clear, business-oriented brand position in the Baltic States, Sweden and Denmark as well as in Norway. Gjensidige has wanted to optimise the connection between the Company s business development and its brand management. The core of this work has been combining the Company s strategic choices and customer orientation with the brand building of the Company. The development of the Gjensidige Experience is a key factor in these efforts. perspective this is gjensidige Gjensidige has established a common framework for the Group s customer orientation the Gjensidige Experience, with the four organisational principles: We keep our promises We always provide quality We make the complicated simple We ensure that the customer is satisfied These four principles shall provide clear guidelines for the organisation and act as guiding principles for Gjensidige s customer-oriented value added and development. The Gjensidige Experience shall characterise our encounter with the customer. It shall distinguish us from our competitors and ensure that Gjensidige will be one of the most customer-oriented companies in the market in any business sector.

6 gjensidige annual report 2010 Markets The Scandinavian general insurance markets are consolidated markets. This is particularly true for Norway and Sweden, where the three largest players account for 70.7 and 63.7 per cent of the market respectively, but also for Denmark, where the three largest players account for 53.3 per cent of the market. The Scandinavian insurance markets are distinguished by cost-efficient and disciplined players that focus on profitability. However, this has not prevented new players from entering the field in recent years both established financial groups with a more extensive new range of products and foreign insurance companies, as well as a few minor niche players. This has resulted in a market with strong competition among the providers. In the Baltics, the biggest players are foreign financial groups. Only one of the five biggest companies is locally owned. The distribution model deviates somewhat from the Scandinavian one, through more extensive use of agents, and this is illustrated by the substantially higher cost ratio with which the Baltic players operate. Market share Norway, total Market share Denmark Other 19.0% Other 30.7 % Tryg 20.8 % Gjensidige 27.9% Sparebank1 10.3% Topdanmark 18.6 % Tryg 17.1% Gjensidige 5.8 % Alm. Brand 10.1 % If 25.7% Codan 13.9 % Based on premium portfolio 2010 Based on gross premiums written 2010 Market share Norway, private Market share Sweden Other 21,1% Other 19.3% Länsförsäkringar 28,8% Gjensidige 27,2% Gjensidige 1.3% Sparebank1 12.5% Tryg 16,8% If 24.2% Folksam 15.2% Trygg-Hansa 16.0% If 18,9% Based on premium portfolio 2010 Based on earned premiums 2010 Market share Norway, commercial Market share Baltic sources: 1 Finance Norway, general insurance statistics, Q4 2010. Sparebank1 Skadeforsikring og Sparebank1 Livsforsikirng presented together. 2 The Danish Insurance Association, general insurance statistics 4th quarter 2009, Nykredit Forsikring included 3 The Swedish Insurance Federation, general insurance statistics, 4th quarter 2010 4 Insurance Supervisory Authorities of Latvia, Lithuania, Estomia; Estonia Statistics; Gjensidige Baltic reports, Swedbank Varakirdiustus interim report 4th quarter 2010; with manual corrections. Other 18,6% Sparebank1 5,2% Tryg 17,0% Gjensidige 29,8% If 29,4% Based on premium portfolio 2010 Codan 20.8% If 15.0% BTA 14.6% Gjensidige 6.9% Other 29,2% Ergo 13.5% Based on gross premiums written 2010

gjensidige annual report 2010 7 perspective this is gjensidige NORWAY SWEDEN ESTONIA LATVIA Financial offices Local offices Fire mutuals Nordic Baltics DENMARK LITHUANIA

8 gjensidige annual report 2010 Preserving security The roots of today s Gjensidige Group can be traced back to the inner parts of Eastern Norway in the years around 1820, when Lands Private Brandassuranceforening was founded as the first mutual fire insurer. By 1920, the number of mutual fire insurers had increased to 260. The Group s life insurance business can be traced back to the establishment of Christiania Almindelige Gjensidige Forsørgelsesanstalt in 1847. The Group has been preserving security for about 190 years 1922 The Company was estab lished with the name of Samtrygd as a joint rein surance company for the mutual fire insurers in Norway. 1974 Samtrygd merged with Norsk Bilfor sikring Gjensidige (NBG) and became the biggest car insurance company in the Norwegian market. Later that same year, collaboration was entered into with Gjensidige Liv under the Gjensidige brand and the Watchman logo. The companies were placed under joint management in 1985. 1998 Gjensidige had evolved into a financial group with a full range of general and life insurance, pension and other financial services as well as online Internet banking services. 1932 The Watchman was put to use as the logo of Gjensidige Liv together with the slogan Time passes; Gjensidige endures. 1958 The Company offered insurance directly to the market. At the same time, the insurance cover and range of products were expanded. The new products were also sold through the mutual fire insurers and gave them the possibility of covering the entire need for insurance in their local markets. 1993 The acquisition of Forenede Forsikring resulted in a significant expansion of the Company s business.

gjensidige annual report 2010 9 1999 Sixteen regional mutual fire insurers merged with Gjensidige Forsikring, transforming Gjensidige from a mutual federation of Gjensidige companies into an integrated mutual group. Later that same year, Gjensidige, Gjensidige Liv and Sparebanken nor merged and combined their business operations to form the financial group Gjensidige nor. 2001 The Group acquired Falck and became active in the Norwegian health service market. 2003 Gjensidige nor asa merged with DnB Holding asa and established DnB nor asa. A strategic cooperative agreement was established between the new group and Gjensidige. 2007 The online Internet bank, Gjensidige Bank, was established. 25 per cent of the equity in Gjensidige Forsikring BA was re-classified to equity certificate capital, and transferred to the Gjensidige Foundation 2006 The Group started new operations in pensions and savings. 2009 Gjensidige Bank ac quired Citibank s Norwegian business in consumer financing. perspective this is gjensidige 2002 Gjensidige nor was divided into two cooperating groups, the general insurance group, Gjensidige nor Forsikring and the stockexchange-listed banking and life insurance company, Gjensidige nor asa. 2005 The cooperative agree ment between Gjensidige and DnB nor was terminated. Gjensidige expanded its geographical area to include Denmark, Sweden and the Baltic States. 2010 Gjensidige Forsikring BA was converted into a public limited company (asa). At the same time, the Gjensidige Foundation was converted into a financial foundation and became the owner of all of the shares in the Group. Gjensidige Forsikring asa was listed on the stock exchange in december. The Gjensidige Foundation sold nearly 40 per cent of its shares..

10 gjensidige annual report 2010 combined ratio development Equity and solvency MArgin capital Return on equity 100 % 80 60 Combined ratio Loss ratio 25.000 NOK million 20,000 15,000 Equity 25 % 20 15 40 10,000 10 20 0 2006 2007 2008 2009 2010 Cost ratio 5,000 0 2006 2007 2008 2009 2010 Solvency margin capital 5 0 2006 2007 2008 2009 2010 Combined ratio, net of reinsurance = Loss ratio, net of reinsurance + Cost ratio, net of reinsurance Solvency margin capital = Net subordinated capital including share of security provisions (based on the company accounts for Gjensidige Forsikring ASA) Return on equity = Profit before tax expense / average equity for the period. Financial key figures Restated profit and loss 2010 2009 2008 2007 2006 Earned premiums, general insurance NOK million 17,063.3 15,660.4 15,481.9 14,848.0 13,188.6 Other operating income NOK million 1,727.5 1,010.3 989.5 481.5 320.2 Net income from investments NOK million 2,748.2 2,788.0 (258.7) 2,809.6 3,689.6 Claims incurred, general insurance NOK million (13,456.6) (12,071.0) (11,983.8) (11,696.5) (10,031.2) Other claims incurred, losses etc. NOK million (743.0) (390.3) (393.3) (90.7) (4.1) Operating expenses, general insurance NOK million (2,810.4) (2,771.5) (2,638.3) (2,598.9) (2,487.1) Other operating expenses NOK million (1,274.9) (1,059.2) (890.1) (741.1) (445.3) Tax expense NOK million (303.6) (861.8) (55.0) (541.3) (138.7) Profit for the year NOK million 2,950.4 2,304.8 252.3 2,470.5 4,091.9 Underwriting result, general insurance 1 NOK million 796.3 817.9 859.8 552.6 670.2 Run-off results, general insurance 2 NOK million 301.1 310.2 417.3 49.5 (18.0) Combined ratio, net of reinsurance 3 Per cent 95.3% 94.8% 94.4% 96.3% 94.9% Loss ratio, net of reinsurance 4 Per cent 78.9% 77.1% 77.4% 78.8% 76.1% Cost ratio, net of reinsurance 5 Per cent 16.5% 17.7% 17.0% 17.5% 18.9% Restated Balance sheet 2010 2009 2008 2007 2006 Investment portfolio 6 NOK million 52,347.0 50,669.1 47,771.8 46,803.0 41,966.0 Provisions for unearned premiums, gross NOK million 9,078.3 7,671.7 6,760.9 6,060.2 5,737.9 Claims provisions, gross NOK million 28,339.3 25,857.2 25,561.5 23,147.1 17,556.7 Equity NOK million 23,137.8 21,968.2 19,585.9 20,302.5 19,017.3 Total equity and liabilities NOK million 84,106.8 74,868.9 65,551.4 58,159.9 47,112.7 Solvency margin capital 7 NOK million 15,471.1 17,081.4 15,409.3 13,423.5 14,760.3 Solvency margin 8 Per cent 581.2 713.8 642.2 561.3 645.2 Capital adequacy ratio 9 Per cent 16.1 18.9 20.7 26.1 41.6 Restated return 2010 2009 2008 2007 2006 Return on financial assets (roi) 10 Per cent 5.2 5.5 (0.6) 6.3 9.2 Return on equity (roe) 11 Per cent 14.4 15.2 1.5 15.4 24.2

gjensidige annual report 2010 11 NuMBer of employees per country NuMBer of employees by business area Sweden 151 Denmark 486 Baltics 451 Pension and savings 49 Health care services 607 Online retail banking 132 Norway 2.829 General insurance 3,129 The Group had a total of 3,917 employees at the end of 2010 Non-financial key figures Health, safety and environment 2010 2009 2008 2007 2006 Sickness absence, Gjensidige Forsikring Per cent 5.2 5.0 6.1 5.7 5.0 Injuries, Gjensidige Forsikring Number 0 0 0 0 0 Turnover of employees, Gjensidige Forsikring Per cent 11.6 11.4 12.6 19.6 10.0 employees 2010 2009 2008 2007 2006 Group, as a whole Persons 3,917 3,780 3,640 3,460 2,033 Average age, Gjensidige Forsikring Year 44.4 44.6 45.1 45.7 45.9 Average amount spent on skills development per employee NOK 10,420 10,000 5,400 9,300 10,000 Participation in a training programme Days 6,200 3,231 4,756 2,485 2,500 perspective this is gjensidige Definitions: 1. Underwriting-result, general insurance = earned premiums, net of reinsurance - claims incurred etc operating expenses 2. Run-off result, general insurance = change in estimates from earlier periods 3. Combined ratio, net of reinsurance = claims ratio, net of reinsurance + cost ratio, net of reinsurance 4. Loss ratio, net of reinsurance = claims incurred etc. / earned premium, net of reinsurance 5. Cost ratio, net of reinsurance = operating expenses / earned premium, net of reinsurance 6. Investment portfolio = includes all investment funds in the Group, except Pension and savings and Online retail banking 7. Solvency margin capital = net subordinated capital including share of security provisions (based on the company accounts for Gjensidige Forsikring ASA in accordance with NGAAP) 8. Solvency margin is calculated at company level according to regulations from the Financial Supervisory Authority of Norway. 9. Capital adequacy ratio = net subordinated capital / risk-weighted calculation basis (based on the consolidated accounts in accordance with NGAAP). 10. Return on financial assets = net financial income as a percentage of the average financial assets including property (excluding Pensions and savings and Online retail banking) 11. Return on equity = profit before tax / average equity for the period

12 gjensidige annual report 2010 TArgets and strategy Gjensidige s overarching goal is to be a leading, profitable, customer-oriented general insurance company in the Nordic market. General insurance operations are the Group s core operations. Gjensidige is currently a full-fledged provider of products in general insurance and insurances of the person to Norwegian private and com mercial customers. Other target areas a broad range of products in Norway and general insurance in the Nordic countries and the Baltics should primarily support the core business operations by offering relation-building products and services and economies of scale, respectively. Gjensidige s sound brand forms a good basis for the sale of new products and services to the Group s roughly one million customers in Norway. Combined with a further development and expansion of the loyalty programmes in the general market and aimed at the organisation market, this will contribute to more satisfied customers and reduced customer churn. The Group s own data shows that customers who enter into a customer programme in the private and agricultural market have an average customer relationship with Gjensidige that lasts a little over 12 years, whereas the other customers last a little over 5 years on the average. The Group s focus on the relation-building support areas of banking, pension and savings, and health services shall strengthen the Group s competi tiveness and help develop Gjensidige as a customer-centric player. The Group s substantial customer base represents a unique opportunity to succeed with profitable growth through the cross sale of new services to insurance customers. A diversified product portfolio will allow Gjensidige to capitalise to a greater extent on the value of its existing customer base and distribution platform. Through growth in general insurance in the Nordic countries and the Baltics, the Group shall achieve economies of scale in the form of synergies that contribute to long-term value creation, increased competitiveness through the addition of new customers and greater risk diversification through a larger and more diversified portfolio. The cost synergies are especially achieved in the areas of reinsurance, development and management of insurance products, common guidelines for underwriting, more efficient capital allocation and common ICT solutions. In addition to organic growth, Gjensidige will also attempt to grow in the coming years through the acquisition of other businesses that support the Group s growth strategy within its range of products and services and its geographical area, provided that the transactions support the Group s long-term return on equity requirements of 15 per cent before tax. Gjensidige is and shall be an attractive workplace that attracts, challenges and develops motivated and competent employees and managers. This will be achieved through a strong concentration on management and employee development, the development of good, fair reward models and a systematic effort to further develop the skills in the organisation. General insurance = Core business Healthcare services Online retail banking Pension and savings General insurance Support products Geographical expansion - scale Norway Nordic Baltic

gjensidige annual report 2010 13 TArgets AreA goals comments Group Return on equity before tax > 15 per cent Return on equity in 2010 of 14.4 per cent Rating Dividend Maintain single A-rating from Standard & Poor s 50-80 per cent of the profit for the year after taxfor the Group A-rating confirmed by Standard & Poor s in August 2010 The Board of Directors recommends that NOK 2,350.0 million be paid in dividends for 2010, corresponding to 80 per cent of the profit for the year, after tax, for the Group perspective this is gjensidige GENERAL INSURANCE Combined ratio < 97 per cent 90-93 per cent Combined ratio of 95.3 per cent in 2010 Adjusted goal effective starting in 2011 Claims incurred Reduction of NOK 400 to 500 million (inflation adjusted) as of 2011 Reduction from 2007-level Delivered Operating expences Reduction of NOK 300 to 400 million (inflation adjusted) as of 2011 Reduction from 2007-level Delivered pension And SAvings Profitability Goal of achieving break-even during 2011 Assets under management Annual doubling An important criterion for achieving the goal is further growth in assets under management Goal for the period 2008-2010 Increased by 104.5 per cent in 2010 online retail BAnking Profitability Goal of achieving break-even during 2010 Delivered Core capital adequacy > 12 per cent At year-end 2010, the core capital adequacy was 16.1 per cent HEALTH CARE SERVICES EBITA-margin 6-8 per cent EBITA-margin of 5.0 per cent in 2010

operations

gjensidige annual report 2010 15 operations The operations in Gjensidige are divided into seven business areas: general insurance Private, Commercial, Nordic and Baltic, Pension and savings, Online retail banking and Health care services. In addition to the seven business areas, the asset management function manages the Group s investment portfolio. Online retail banking 4.2% Pension and savings 1.8% Baltic 2.5% INCOME PER SEGMENT 1 Health care services 2.9% perspective operations Nordic 20.9% Private 44.2% Commercial 23.6% 1 The distribution is based on earned premiums, net of reinsurance, excluding other income and elimination GENERAL insurance norway general insurance is Gjensidige s core business a complete supplier of general insurance products to private customers in Norway and a full range of products in general insurance and insurances of the person to Norwegian business and commerce 859,500 private and agricultural customers 91,000 commercial customers The support AreAS the support areas have been established in order to support our core business in Norway pension and savings: A broad range of pension, investment and savings products is offered for both the private and commercial markets in Norway online retail banking: Through Internet banking, banking products are offered to the private and agricultural markets in Norway Health care services: Under the brand name Hjelp24, various health services are offered to private customers, companies and to the public sector in Norway Geographical expansion expansion of the general insurance operations into Denmark, Sweden and the three Baltic States established position through seven acquisitions in the period 2006-2010 the private and commercial market in Sweden and Denmark insurance to municipalities and municipal operations in Norway, Sweden and Denmark general insurance in all three of the Baltic States Asset MAnagement the asset management function manages the Group s investment portfolio within constraints set by the Board of Directors the portfolio consists of investments in a number of asset classes, including bonds and money market instruments, property and shares assets under management of nok 52,347.0 million at year-end 2010

16 gjensidige annual report 2010 general insurance private norway A solid brand and high customer satisfaction are the key to Gjensidige s leading position in private insurance in Norway. Continuous improvement and measures to increase the customer value ensure a strong customer orientation in all points of contact with the customers, resulting in increased customer satisfaction. OPERATions The business area Private Norway offers a broad range of insurance products and services: accident and health (disability and accident insurances, sickness and treatment insurances, child insurances) property (home-owner s and holiday home insurance, household contents insurance) Motor (liability and casco insurance for cars, motor cycles, mopeds and motor homes, casco insurance for caravans, boat insurance) agricultural insurance (building and home contents insurances, insurance of production animals, insurance of farm machinery) other insurances (travel insurance, pet insurance, etc.) Gjensidige also offers banking, savings and investment products to its private customers and is enjoying good customer growth in these product areas. Solid brand position Gjensidige is positively distinguished from other companies by having the highest percentage among both its own customers and in the market in general, who think the Company fits the descriptions reliable and has satisfied and loyal customers (source: Competitor and Brand Survey 2010. Synovate). For a player in a trust-based business sector, this is a very attractive position in which to be. Leading market position Gjensidige is the biggest player in the private market, with a market share of 27.2 per cent in 2010, a slight reduction from 27.5 per cent in 2009. At the product level, Gjensidige is the market leader in both car and home-owner s insurance. In the agricultural segment, Gjensidige has a market share of fully 71.3 per cent. Customer programme contributes to loyalty At year-end 2010, Gjensidige had 859,500 private and agricultural customers. About 316,000 of these customers were included in the customer programme Gjensidige Fordel, where the customers earn a number of benefits in addition to a customer discount based on their overall relationship with Gjensidige. About 303,000 of the customers are included in various customer programmes that Gjensidige has with key partners such as the Norwegian Farmers Union, the Norwegian Farmers and Smallholders Union, the Norwegian Fishermen s Union, the Confederation of Vocational Unions (YS), the Norwegian Society of Engineers and Technologists (nito) and Tekna. Gjensidige s loyalty programme and organisation customers often have a long-term relationship to the Company. The average lengths of the customer relationships in these two categories are 11 and 16 years respectively, compared with an average of five years for other customer relationships. In 2010, Gjensidige renewed the agreements with the Norwegian Farmers Union, YS, nito and Tekna. The results are long-term agreements that provide a good basis for a further improved position in the organisational market in the coming years. Breadth in customer purchases Surveys show that customers who have purchased more than one product from Gjensidige are more satisfied than customers who only have one. It is a top priority objective for the Company to increase the percentage of customers who bundle their insurance, banking and pension products with Gjensidige. Best when it counts During 2010, the business area Private Norway handled nearly 322,000 claims settlements. Our goal is to be the company that takes best care of its customers, and this includes after a loss has occurred. Distribution channels Gjensidige has a multi-channel strategy where products and services are distributed by phone, Internetbased solutions and our local offices. The customer gets uniform service regardless of the channel. Insurance and financial offices Gjensidige currently has in excess of 50 insurance offices distributed throughout the country. The insurance offices are responsible for functions where local knowledge, a one-on-one relationship and personal contact are appropriate. All of the insurance offices offer the full range of products from the Group, but with different degrees of local specialist expertise. In 21 places where the customer base is sufficient, financial offices have been established with specialist expertise in the whole range of services. Key figures NOK million 2010 2009 2008 2007 Gross premiums written 8,618.9 8,035.3 8,010.6 7,910.6 Earned premiums, net of reinsurance 8,279.4 7,856.2 7,911.4 7,729.8 Claims incurred, etc. (6,296.7) (6,007.4) (5,795.6) (5,757.2) Operating expenses (1,194.5) (1,296.3) (1,340.8) (1,376.3) Underwriting result 1 788.2 552.4 775.0 596.3 Loss ratio, net of reinsurance 2 76.1% 76.5% 73.3% 74.5% Cost ratio, net of reinsurance 3 14.4% 16.5% 16.9% 17.8% Combined ratio, net of reinsurance 4 90.5% 93.0% 90.2% 92.3% Definitions: 1. underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2. loss ratio, net of reinsurance = claims incurred etc./earned premiums, net of reinsurance 3. Cost ratio, net of reinsurance = operating expenses/earned premiums, net of reinsurance 4. Combined ratio, net of reinsurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance

gjensidige annual report 2010 17 ProduCt groups, private NorWAy Other 8.7% MArket shares, private NorWAy % 35 customer satisfaction, private NorWAy % 75 Agriculture 11.3% Motor 42.6% Accident and health 16.6% Property 20.8% 30 25 20 15 10 2006 2007 2008 2009 Gjensidige if Tryg Sparebank1 2010 70 65 60 Loyalty programmes Organisation market No agreement Total Based on gross premiums written 2010 Total non-marine insurance excluding insurances of the person. Source: Customer satisfaction survey, self-initiated custumer analysis, conducted by Norsk Kundebarometer/BI. Gjensidige cooperates with 19 mutual fire insurers throughout the country, which function in the same way as the insurance offices of Gjensidige Forsikring. Sales centre Gjensidige has established a specialised outward sales channel that employs technology for high activity and efficiency. The channel is working with potentially new and existing customers and helps create further growth in Gjensidige. Customer centre Gjensidige s customer centre is an independent sales and relationship channel that provides service and sells insurance and financial products to private customers by telephone and over the Internet. The three customer centres are also open in the evening and receive about 1.2 million incoming telephone calls annually. Gjensidige.no The Financial Portal, gjensidige.no, is becoming a more and more important channel for Gjensidige s contact with private customers. The number of selfservice customers has undergone a steady growth in 2010, and more and more customers complete their purchases and service over the Internet. Agents and car dealers As a supplement to Gjensidige s own channels, products are distributed through agents, including banks, a large number of car dealers, estate agencies and other agencies. CUSTOMer orientation in focus In 2010, Gjensidige initiated a number of measures to ensure a further customer orientation and efficient operation of the business. All employees and managers attend Gjensidige s Customer and Brand School, and there is a strong focus on customer orientation. Regular evaluation of customer satisfaction is conducted at all levels and forms a good basis for adjustments in measures. The new home insurance rate that was introduced in 2010 ensures an even more correct pricing of the risk associated with the customer s home The processes for claims handling are continiously improved in order to give the customers both rapid and more correct claims settlements. RESULTS Earned premiums, net of reinsurance came to nok 8,279.4 million in 2010, an increase of 5.4 per cent from the previous year. The trend in earned premiums in 2010 reflects the effect of implemented premium increases. New premium rates for the motor vehicle and home-owner products, introduced in the autumn of 2009 and the summer of 2010 respectively, ensure a more correct pricing of risk. Claims incurred, net of reinsurance came to nok 6,296.7 million in 2010, compared with nok 6,007.4 million in 2009. The loss ratio came to 76.1 in 2010, compared with 76.5 the previous year. Claims incurred for 2010 were affected by the frost at the beginning of the year, whereas claims incurred for 2009 were affected by a substantial bolstering of the actuarial reserves for the child insurance product. Large losses* came to nok 107.5 million in 2010, compared with nok 42.7 million in the previous year. Claims incurred for 2010 were positively affected by run-off gains**, as opposed to a run-off loss in the previous year, primarily as a result of the effect of strengthening the actuarial reserves for the child insurance product in 2009. The cost ratio came to 14.4 for 2010, a reduction of 2.1 percentage points relative to the previous year. Nominally, the expenses were reduced by nok 101.9 million in 2010 relative to 2009. The reduction came as a result of the efficiency improvement efforts. The combined ratio for 2010 was 90.5 per cent, compared with 93.0 in 2009. The underwriting result came to nok 788.2 million in 2010, compared with nok 552.4 million in the previous year. OBJecTives and STraTEGies The business area shall support the Group s CR objective of 90-93 starting in 2011: the operations shall be made more efficient, and both claims incurred and operating expenses shall be further reduced. The leading position in the Norwegian private market shall be maintained: Continued growth in the premium level. Further improvement of the distribution. Continuation of the effort to increase private customers involvement in the Company. Gjensidige shall be the leading company when it comes to customer orientation: differentiation through extreme customer orientation the quality of service shall be increased at all points of contact with the customer the products shall be further simplified and improved in order to improve the customer orientation. OUTlooK The Norwegian general insurance market has traditionally been distinguished by strong brands and four well-positioned players. Adequate profitability over a number of years has allowed new competitors to enter the market. Small niche companies have gradually increased their market shares, partly through aggressive pricing. The banks have also entered the market and offer competition with favourable product bundle pricing and their frequent contact with customers. With a leading brand, strong efforts to improve customer orientation and a full range of products offered, Gjensidige is well positioned to meet this competition. * losses exceeding nok ten million ** rub-off gain/loss = actuarial gains and losses from earlier periods perspective operations

18 gjensidige annual report 2010 general insurance CoMMercial NorWAy In 2010, Gjensidige has consolidated its position as the biggest player in the commercial market, with a market share of 29,8 per cent at year-end 2010. The Company s solutions in insurance, pensions and health care provide security for life, health and business assets. OPERATions Gjensidige offers Norwegian business and commerce a broad range of insurance solutions for: accident and death (occupational injury insurance mandated by law, insurance in the event of other illnesses and accidents on the job and during leisure time, group life, treatment guarantee and travel insurance) Motor (company car, lorry, bus, heavy equipment) property (including assets and operating losses) liability (public liability, property damage liability, product liability and recall, directors and officers liability, crime insurance, legal expenses) Marine/cargo (coastal and fishing boat, building risk, aquaculture, insurance of goods under transport) In addition, Gjensidige can offer its commercial customers comprehensive solutions that also meet the commercial customers needs for pension and savings products as well as selected health care services through Hjelp24. At year-end 2010, 85 per cent of the group s pension customers were also general insurance customers. Distribution About 2,700 of the commercial customers are served indirectly through insurance brokers. The remaining customers were served by the Group s direct distribution system, fire mutuals, agencies and marine insurance associations. Corporate customers/brokers (kkm) KKM is a national relationship channel with brokers and Norway s largest enterprises. KKM has a high level of marketing and professional expertise with a strong focus on risk assessment and risk management. The service and servicing concept is based on relations with customers and brokers, a high level of professional expertise and often solutions that are specially adapted to meet the customers needs. Specialised customer centres A business centre is an efficient sales and customer centre that ensures high accessibility and uniform service of small and medium-sized corporate customers. The channel offers many standardised products and prices and serves the customer by phone and Internet. Insurance offices Medium-sized and large corporate customers are served through Gjensidige s insurance offices, which are staffed with specialists in commercial insurance. Internet Gjensidige offers sector-adapted advice and sales of bundled products on open websites. In addition, the Næringsnett and Pensjonsnett websites give the customer access to updated information about his/her customer relationship and the possibility of reporting changes or preferences for offers on new products. Agencies, mutual fire insurers and marine insurance associations Fire mutuals ensures distribution in areas where Gjensidige does not have its own offices. Cooperating Marine insurance associations distributes vessel insurance to Norwegian fishing- and coastal vessels. The agencies supplies our own distribution in growth areas, and only distribute for Gjensidige and do so under a common brand. Market leader Gjensidige is the market leader in the commercial segment, and at year-end 2010 it had a market share in the commercial segment of 29.8 per cent. This is somewhat lower (0.8 percentage points) than at year-end 2009. The total market in the commercial segment decreased during 2010. The declining market is a result of considerable price competition between the major established players and many new minor players. In this situation, Gjensidige has a responsibility as the market leader and will continue to consistently focus on profitability. At year-end 2010, Gjensidige had about 90,000 commercial customers. Each company had an average of about 2.4 insurance products. Key figures NOK million 2010 2009 2008 2007 Gross premiums written 4,670.3 5,003.8 5,120.0 5,464.7 Earned premiums, net of reinsurance 4,418.5 4,737.3 4,909.7 5,072.7 Claims incurred etc. (3,602.6) (3,819.0) (4,219.7) (4,331.4) Operating expenses (570.0) (613.3) (630.4) (647.7) Underwriting result 1 245.8 305.0 59.7 93.6 Loss ratio, net of reinurance 2 81.5% 80.6% 85.9% 85.4% Cost ratio, net of reinurance 3 12.9% 12.9% 12.8% 12.8% Combined ratio, net of reinurance 4 94.4% 93.6% 98.8% 98.2% Definitions: 1 underwriting result = earned premiums, net of reinsurance - claims incured etc. - operating expenses 2 loss ratio, net of reinurance = claims incurred / earned premiums, net of reinsurance 3 Cost ratio, net of reinurance = operating expenses / earned premiums, net of reinsurance 4 Combined ratio, net of reinurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance

gjensidige annual report 2010 19 Product groups, CoMMercial NorWAy MArket shares, commercial norway customer SAtisFAction commercial norway Liability 6.7% % 40 % 75 Marine 5.7% Motor 18.8% Other 0.7% Accident and health 37.8% 30 20 Gjensidige If Tryg Corporate customers Intermediate market 70 Business centers 10 Sparebank1 Agriculture centers Property 30.4% 0 2006 2007 2008 2009 2010 65 2009 2010 Based on gross premiums written 2010 Total non-marine insurance, excluding insurances of the person Source: Customer satisfaction survey, self-initiated custumer analysis, conducted by Norsk Kundebarometer/BI. TarGET areas in 2010 Profitability Also in 2010, the main focus has been on underlying profitability and quality requirements in the portfolio. Some segments in the marine business have been completely discontinued. Price adjustments have been implemented based on overall and customer-specific profitability. New security measures have been introduced for vulnerable individual business sectors, such as goldsmiths and watchmakers. Claims incurred, net of reinsurance came to nok 3,602.6 in 2010, compared with nok 3,819.0 million in 2009. For 2010, the loss ratio was 81.5, a worsening from 80.6 in 2009. Claims incurred was affected by the frost in the first quarter of 2010. The level of large losses* was somewhat lower in 2010 compared to 2009, and came to nok 189.5 million. (193.1). The run-off gain** in 2010 was somewhat higher compared with the run-off gain in 2009. Further development of the distribution model: improvement of processes and rationalisation. Use of technology to automate internal and external processes provides opportunities for new methods of working. Further differentiation of the distribution model among different customer segments. Efforts will be made to develop solutions that give increased access to self-service solutions on the Internet. perspective operations Distribution of the full range of products Distribution of savings and pension insurance through the traditional sales channels has been successful, with good profits in all sales channels. This model ensures a comprehensive service of our customers. Gjensidige s Customer and Brand School Through a number of meetings at the Gjensidige School in 2010, all employees and managers in the commercial segment have been given renewed training in customer service that is strongly based on Gjensidige s brand and culture. Restructuring In the autumn of 2010, a major restructuring was carried out in order to improve both customer service and profitability in the commercial market. New organisation of sales and customer service will be operative during the first quarter of 2011. RESULTS Earned premiums, net of reinsurance came to nok 4,418.5 million in 2010, a decrease of 6.7 per cent from the previous year. The reduction in premium volume was mainly attributed to a clear prioritisation of profitability over volume, e.g. by discontinuing specific segments in the marine portfolio and giving less priority to the insurances of the person portfolio. The trend with a high number of frequent claims in recent years makes further price increases necessary in some business sectors, but to a lesser extent than those that have already been implemented. The cost ratio was 12.9 for 2010, which was the same as in the previous year. Nominally, expenses were reduced by nok 43.3 million in 2010 relative to 2009. As a result of the lower premium volume, cost-cutting measures were implemented in all parts of the business. Further measures are planned, and the management has devoted considerable attention to cost control. The combined ratio for 2010 was 94.4 per cent, compared with 93.6 in 2009. The underwriting result came to nok 245.8 million in 2010, compared with nok 305.0 million in the previous year. OBJecTives and STraTEGies The business area shall support the Group s CR objective of 90-93 starting in 2011 through a continued focus on profitability and growth: rebalancing the portfolio. improvement of pricing and rating. stronger focus on the profitable SME segment. utilise the customer database to identify growth areas, including cross sales of pension and health products. Focus on customer orientation: the quality of service shall be increased at all points of contact with the customer. gjensidige shall be the market leader in customer service and customer satisfaction. OUTlooK New competitors are still gaining a foothold in the commercial market. These competitors are mainly concentrating on distribution through insurance brokers and through industry-wide agreements, and they are giving rise to greater competition in all segments. Gjensidige s sound financial situation, long-term perspective and focus on customer orien tation are expected to be important competitive advantages in the coming years. It is expected that the market for defined-contribution pensions and health-related services will increase in the coming years. Use of technology to automate internal and external processes provides new opportunities for cost cutting and forms of cooperation; e.g. with regard to the transfer of information from customer to service provider. It is expected that through increased accessibility of self-service solutions on the Internet, the customers, especially those in small businesses, will transfer more of their transactions with the Company over to the Internet. * losses exceeding nok ten million ** run-off gain/loss = actuarial gains and losses from earlier periods

20 gjensidige annual report 2010 general insurance nordic Gjensidige s Nordic business offers customised solutions to its private and commercial customers in Sweden and Denmark. This business also includes the Group s competence centre for insurance to municipalities and municipal operations, where Gjensidige has a leading position in the Scandinavian market. OPERATions The majority of the Nordic business is operated through Swedish and Danish branches of the parent company, Gjensidige Forsikring asa. The exception is the business in the Danish workinjury insurance company, which is organised as a separate company, Gjensidiges Arbejdsskadeforsikring, and Nykredit Forsikring. It is an objective that the business in Nykredit Forsikring in the long run is to be transferred to the Danish branch. In addition, the Group s white label business is operated through the Swedish subsidiary, Tennant Försäkringsaktiebolag. Private and commercial customers Gjensidige currently offers nearly a full range of products to the segment s private and commercial customers in Sweden and Denmark. In the private market, this includes motor vehicle, home, changeof-ownership and accident insurance, among others. In the commercial market, a full range of products is offered with the exception of insurance in the marine segment and guarantee insurance. Most of the insurance products are sold under Gjensidige s name and brand. The exception is insurance that is sold to private customers of the Nykredit Group in Denmark, where Nykredit Forsikring s name and brand are used, and whitelabel products distributed by Tennant. The municipal segment Gjensidige is a complete supplier of general insurance products to Scandinavian municipalities and municipal operations. This also includes workers compensation insurance and the organisation of schemes for own insurers. The white label market In the Company s white label business, the target group consists mainly of products for the private market in Norway. In addition to standardised products for the private market, the portfolio also consists of some niche products. Based on the customer composition in the the white label portfolio, the business is transferred to Private Norway from January 1th 2011. Various distribution models Denmark The private market in Denmark is served via the call centres in Copenhagen and Viby as well as via the Internet. In addition, private products are sold through partners, including Kia Motors, the Danish Consumers Co-operative Society (FDB), the Danish Association of Managers and Executives and edc, Denmark s largest estate agency chain. In the Danish commercial market, the sales are conducted in cooperation with brokers along with own insurers in the case of small and mediumsized corporate customers and agriculture. In connection with the acquisition of Nykredit Forsikring, a long-term distribution agreement with the Nykredit Group was also signed. Nykredit is one of Denmark s largest financial groups, with an extensive distribution network with 70 branch offices and the two estate agency chains, Nybolig and Estate, comprising about 310 offices in addition to a telephone-based customer centre. Nykredit distri butes general insurance on behalf of Gjensidige to both the private and commercial markets. Sweden In Sweden, general insurance products are distributed to private persons both directly by phone and Internet and through insurance mediators (partners and agents). For the commercial market, the distribution is mainly through insurance brokers and partners The municipal market The distribution in the municipal market is conducted either directly or by brokers. The market is primarily based on competitive tenders. The white label efforts The distribution is mainly through agents and business partners, such as shops, car dealers and banks that want to expand their range of products to include insurance products under their own brand. Key figures NOK million 2010 2009 2008 2007 Gross premiums written 3,812.4 2,657.3 2,155.5 1,810.4 Earned premiums, net of reinsurance 3,906.1 2,403.5 2,068.4 1,685.3 Claims incurred, net of reinsurance (3,252.0) (1,833.0) (1,604.4) (1,376.8) Operating expenses (731.5) (417.5) (350.8) (360.8) Underwriting result 1 (77.4) 152.9 113.2 (52.3) Amortisation other intangible assets (226.5) (109.9) (85.3) (85.7) Loss ratio, net of reinsurance 2 83.3% 76.3% 77.6% 81.7% Cost ratio, net of reinsurance 3 18.7% 17.4% 17.0% 21.4% Combined ratio, net of reinsurance 4 102.0% 93.6% 94.5% 103.1% Definitions: 1. underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2. loss ratio, net of reinsurance = claims incurred etc./earned premiums, net of reinsurance. 3. Cost ratio, net of reinsurance = operating expenses/earned premiums, net of reinsurance 4. Combined ratio, net of reinsurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance

gjensidige annual report 2010 21 Product groups, Nordic MArket share, DeNMArk MArket share, Sweden Liability3.5% Other 6.3% Accident and health 20.3% Other 30.7 % Tryg 20.8 % Topdanmark 18.6 % Other 21,1% Länsförsäkringar 28,8% Gjensidige 1.3% Motor 30.2% Property 39.7% Gjensidige 5.8 % Alm. Brand 10.1 % Codan 13.9 % Folksam 15.2% Trygg-Hansa 16.0% If 18,9% Based on gross premiums written 2010 Source: Forsikring & Pension 4th quarter 2009 Source: Swedish Insurance Federation 4. quarter 2010 DoubleD MarKET share and significant increase in The DisTribuTion system Effective 29 April 2010, Gjensidige acquired the Danish insurance company Nykredit Forsikring for nok 2.7 billion. On the date of acquisition, the enterprise had 230,000 customers, gross earned premiums in excess of DKK 1.4 billion and about 320 employees. The acquisition increased Gjensidige s market share in the Danish market from about 2.8 per cent to about 5.8 per cent (The Danish Insurance Association, market shares as per 4th quarter 2009, last available statistics). Annual synergies of nok 226 million have been identified and will take full effect starting in 2014. These synergies mainly involve distribution, it, reinsurance, coordination of staff and support functions and implementation of Gjensidige s group functions. The integration efforts were initiated immediately after the acquisition, and they have already yielded significant results. At year-end 2010, more than 40 per cent of these synergies had already been exploited, primarily in connection with reinsurance, cutbacks of 120 employees and integration of it systems. The implementation costs are estimated at about nok 172 million and will accrue in the period to the end of 2012. The strategic cooperation with the Nykredit group on distribution represents a considerable potential for Gjensidige in the Danish market. In 2010, a distribution agreement was also entered into with Denmark s largest estate agency chain, edc, which has more than 240 estate agencies and about a 20 per cent market share in the Danish real estate market. This agreement includes the distribution of insurance products under Gjensidige s brand and will particularly strengthen Gjensidige s position in the private market. The above-mentioned agreements give Gjensidige the largest distribution system and make it the sales leader for change-of-ownership insurance. RESULTS Earned premiums, net of reinsurance came to nok 3,906.1 million in 2010, an increase of 62.5 per cent over the previous year. This increase came primarily as a result of the acquisition of Nykredit Forsikring, which is included in the data starting on 1 May 2010, in addition to growth in the Danish and Swedish commercial business. Claims incurred, net of reinsurance, came to nok 3,252.0 million in 2010, compared with nok 1,833.0 million in 2009. An increased business volume also gives increased claims incurred. Furthermore, the claims incurred in 2010 were affected by a harsh winter in Sweden and Denmark during the first quarter. In August 2010, a judgment was handed down by the Danish Supreme Court on calculating indemnity for part-time employees, and this judgment will result in a higher indemnity for many claims, including the re-opening of previously closed claims. Gjensidige s assessment is that the effect of the judgment is covered by the existing actuarial provisions. Therefore, the judgment has had no accounting effect for Gjensidige. The loss ratio came to 83.3 in 2010 compared with 76.3 in the previous year. The level of large losses* was substantially higher in 2010 than in 2009, which had a negative effect on the underwriting profit. Among other things, the level of major losses in 2010 was affected by a large fire in Sweden and by heavy rains in Denmark in August. Total large losses came to nok 205.9 million in 2010 compared with nok 77.4 million the previous year. The run-off gain** was lower in 2010 than in 2009. The cost ratio was 18.7 for 2010, an increase of 1.3 percentage points compared with the previous year. Nominal expenses increased by nok 313.9 million in 2010 relative to 2009. The increase in the nominal expenses is mainly attributed to the acquisition of Nykredit Forsikring, including integration costs of nok 52.5 million, growth in the commercial segment in Sweden and an increased share of partner-distributed business in the Norwegian white label business. Efficiency improvement measures have been implemented in the Swedish operations to reduce future costs. The combined ratio for 2010 was 102.0 per cent, compared with 93.6 in 2009. The underwriting profit came to nok negative 77.4 million in 2010 compared with nok 152.9 million the previous year. OBJecTives and STraTEGies The business area shall support the Group s CR target of 90-93 starting in 2011: through the acquisition of Nykredit Forsikring, Gjensidige has achieved a size in the Danish market that provides a basis for increased profitability in the coming years. realization of synergies in connection with the acquired business from Nykredit will make an important contribution to a reduced cost level in the Nordic operations. Development of the position in the Danish market: Further growth will primarily occur through acquisitions that support the Group s CR and roe targets of 90-93 and 15 per cent respectively. The distribution agreements with the Nykredit Group and edc are expected to contribute to organic growth that exceeds the market growth. Further development of distribution: Further development of new distribution models through own distribution and partnership agreements OUTlooK Through the acquisition of Nykredit Forsikring, Gjensidige has established a sound platform for the Danish business and is now the fifth largest player in the Danish market. * losses exceeding nok ten million ** run-off gain/loss = actuarial gains and losses from earlier periods perspective operations

22 gjensidige annual report 2010 product groups baltic general insurance BAltic Gjensidige has business in all three of the Baltic States. This business has remained profitable throughout a period with shrinking markets. Expectations for gdp growth in the Baltic States in 2011 give exciting prospects for further growth. OPERATions Gjensidige s efforts in the Baltic market are conducted through its subsidiary, Gjensidige Baltic. The target customers are persons with medium to high incomes in the private market and small and medium-sized enterprises in the commercial market. Gjensidige s Baltic operations provide insurance products to the private and commercial markets in Latvia, Lithuania and Estonia in the following main categories: Motor vehicles property person liability other Motor vehicle insurance constitutes by far the largest proportion of the portfolio, though the percentage of building and personal insurances have increased in recent years. A significant player in the Baltics The Baltic insurance market is in an early development phase, and a significant share of the market is still uninsured. Motor vehicle insurance is the largest insurance product in these markets. The Baltic insurance markets were hard hit by the recession of recent years. Also in 2010, the total market in the three countries continued to decline by 12.2 per cent (source: Insurance Supervision Authorities of Latvia and Lithuania; Estonia Statistics). The decline was greatest in Latvia and more moderate in Lithuania and Estonia. However, in the market in Lithuania, the decline ceased and was replaced by a slight recovery in the middle of 2010. There are a number of major foreign players in the Baltic markets. Of the eight largest insurance companies, only one of them is locally owned. In the Baltics as a whole, Gjensidige is the sixth largest player with an 6.9 per cent market share at year-end 2010. Gjensidige has its strongest market position in Latvia, with a market share of 11.1 per cent. In Lithuania, Gjensidige is the sixth largest player, with a market share of 6.5 per cent. Gjensidige is smallest in Estonia, with a market share of 3.3 per cent. Distribution channels Gjensidige has a total of 98 offices in the Baltics and is represented in 73 different cities. The most important distribution channels are direct sales and sales via insurance agents and brokers. Sales over the Internet are also becoming a more important distribution channel in the Baltic market. COST saving Measures have yielded profits in A DEManDinG year The insurance markets in the Baltic States have undergone a period of rapidly declining insurance volumes and prices as a result of the financial crisis. The declines have been greatest in Latvia, as a result of which the extent of Gjensidige s business in Estonia and Lithuania has increased relative to its business in Latvia. Key figures NOK million 2010 2009 2008 2007 Gross premiums written 395.2 592.2 657.7 432.6 Earned premiums, net of reinsurance 459.3 663.4 592.4 360.2 Claims incurred, net of reinsurance (305.3) (411.5) (371.3) (231.0) Operating expenses (136.7) (211.4) (183.9) (113.9) Underwriting result 1 17.4 40.5 37.1 15.2 Amortisation other intangible assets (8.6) (100.2) (9.3) (17.6) Loss ratio, net of reinsurance 2 66.5% 62.0% 62.7% 64.2% Cost ratio, net of reinsurance 3 29.8% 31.9% 31.0% 31.6% Combined ratio, net of reinsurance 4 96.2% 93.9% 93.7% 95.8% Definitions: 1. underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2. loss ratio, net of reinsurance = claims incurred etc./earned premiums, net of reinsurance. 3. Cost ratio, net of reinsurance = operating expenses/earned premiums, net of reinsurance 4. Combined ratio, net of reinsurance = loss ratio, net of reinsurance + cost ratio, net of reinsurance

gjensidige annual report 2010 23 product groups, baltic Division by country Market share, pan-baltic Liability 4.9% Acident and health 12.0% Other 3.5% Property 16.4% Motor 63.2% Latvia 47.3 % Lithuania 38.2% Estonia14.5 % Codan 20.8% If 15.0% BTA 14.6% Gjensidige 6.9% Other 29,2% Ergo 13.5% Based on gross premiums written 2010 Based on gross premiums written 2010 Insurance Supervisory Commission of the Republic og Lithuania, Latvian Insurance Association, Estonian Statistics, Gjensidige Baltic reports, Swedbank Varakindlustus interim report 4q, with manual corrections Gjensidige s Baltic business has shown a strong capability of implementing measures relating to claims incurred and operating expenses in step with the declining premium volume. These measures have yielded increased profits, and Gjensidige has posted underwriting profits in its Baltic business in 2008, 2009 and 2010. There has been a relatively good growth in premiums in Building and Personal Insurances, which has meant that these products have increased in scope relative to Car Insurance. The slowest growth in premiums was in Motor Vehicle Insurance, the sector that has also had to tolerate the biggest decline in the market. However, Car Insurance is still clearly the most important product and ac counts for about 63.2 per cent of the total premium volume. Gjensidige continued to develop its core insurance products in the Baltic markets in 2010. In addition, the products have been adapted to a market with lower purchasing power. RESULTS Earned premiums, net of reinsurance came to nok 459.3 million in 2010, an increase over nok 663.4 million the previous year. Earned premiums in 2010 were mainly affected by a rapid decline in the premium volume in the insurance markets in the Baltics. Claims incurred, net of reinsurance came to nok 305.3 million in 2010, compared with nok 411.5 million in 2009. The loss ratio came to 66.5 in 2010 compared with 62.0 in the previous year. There were no large claims* in the Baltic business in 2010 or 2009. The relatively higher loss ratio in 2010 was mainly attributed to the abnormally snowy winter in the first quarter and in December. In general, the effects of the financial crisis resulted in less activity, a reduced number of claims and a drop in the price of repair costs, which has also resulted in run-off gains** in both 2010 and 2009. The run-off gain in 2010 is somewhat higher than the run-off gain in 2009. The cost ratio was 29.8 for 2010, a reduction of 2.1 percentage points compared with the previous year. Nominal expenses decreased by nok 74.8 million in 2010 relative to 2009, equivalent to 35.4 per cent. During 2009 and 2010, a number of cost-cutting measures were implemented, and this, together with the lower volume of business, has helped reduce operating expenses. Gjensidige Baltics has one of the best cost ratios in the Baltic market. The combined ratio for 2010 was 96.2 per cent, compared with 93.9 in 2009. The loss and cost ratios were still among the best in the industry in the Baltics. The underwriting result came to nok 17.4 million in 2010 compared with nok 40.5 million the previous year. OBJecTives and STraTEGies The business area shall support the Group s CR target of 90-93 starting in 2011: improving the efficiency of the operations and achieving synergies among the Baltic States. Focus on balancing the trend in costs with the trend in the premium level. One of Gjensidige s objectives is to become one of the leading insurance companies in the Baltics. Main focus on profitable organic growth utilise the potential that can be derived from the continued relative immaturity of the Baltic insurance market. Streamlining distribution: develop new products and continue the efforts to adapt those products to a market with less purchasing power. diversify between direct and indirect distribution channels Focus in particular on further developing the scope of local offices and further developing Internet sales as a distribution channel OUTlooK The Baltic markets are still in an early development phase, and given the significant share of both the private and commercial markets that are still uninsured, solid growth is expected when the general economic situation has improved again. After some difficult years, there is growth again in the Baltic markets, and it is expected that the economy will gradually right itself in the coming years. In the insurance market, moderate growth is expected in 2011. * Losses exceeding nok ten million ** Run-off gain/loss = actuarial gains and losses from earlier periods perspective operations

24 gjensidige annual report 2010 pension and savings Gjensidige offers a broad range of pension, investment and savings products for both the private and commercial markets. Among others, the products include occupational pension insurance, the management of paid-up policies, individual pension savings and fund savings. BUSINESS Gjensidige s operations in the Pension and Savings business are organised with Gjensidige Pensjon og Sparing Holding as serving as the holding company for Gjensidige Pensjonsforsikring as and Gjensidige Investeringsrådgivning asa. This business area provides services in the following main categories: Pensions group occupational pensions: Defined-contribution schemes with associated risk coverage Management of paid-up policies and pension capital certificates individual pensions: Individual Pension Schemes (ips), fund pensions (management of the old Individual Pension Agreement [ipa] schemes), Livrente Link (Annuity Link) and Fondskonto Link (Fund Account Link) individual disability pension Savings active management customised investment solutions for institutional customers the Vekter Funds combination funds (equity funds and fixed income funds) adapted to the customer s investment horizon, ability to save and desired risk Vekter Fund Trygg, Vekter Fund Balansert and Vekter Fund Offensiv a number of funds from reputable managers (unit trusts, bond funds, fixed income funds and alternative investments) Gjensidiges s policy states that all products shall be as transparent and understandable as possible. This is also in harmony with the new MiFid regulations that have been implemented in the whole organisation. In addition, the Company has attached importance to making the advisors remuneration system neutral with regard to the products Across-the-board sales to the Group s insurance customers Pension and savings products are distributed through the distribution channels to the business areas Private Norway and Commercial Norway, where the investment and pension advisers respectively are working systematically on acrossthe-board sales to existing customers. In addition, the products are sold through partners, e.g. Handelsbanken. Pensions and Savings gained 12,622 new customers in 2010 and had a total of 71,947 customers at year-end. A large percentage of these customers, 85 per cent, were also insurance customers. Strong market position In 2010, Gjensidige further enhanced its position as the decidedly largest player in the transfer market for private pension schemes. Gjensidige s market share for transferred funds, fund pensions and annuities amounted to 50 per cent at year-end 2010. Measured relative to premiums in force, Gjensidige has increased its market share from five per cent at year-end 2009 to 7 per cent as per the fourth quarter. The Company is also among the leading players in the new subscription of group definedcontribution pensions. Gjensidige was the second largest player in this market at the end of 2010 with a market share of 27.5 per cent. (Source: Fno) REVIEW of The year Gjensidige offers two alternatives for the management of a defined-contribution pension for its commercial customers: combined and active management. It also offers a fully currency hedged variant of the combined solution. The average return for the three risk profiles in combined management was 10.3 per cent in 2010. The corresponding figure for active management was 8.5 per cent. Key figures NOK million 2010 2009 2008 2007 Gross premiums written 2,296.7 2,077.3 1,562.6 496.4 Earned premiums, net of reinsurance 335.8 116.3 58.1 27.9 Claims incurred, etc. (258.1) (121.5) (39.0) (19.3) Operating expenses (109.6) (102.7) (104.9) (84.9) Underwriting result 1 (31.8) (107.9) (85.7) (76.3) Management income 22.4 11.2 14.7 9.4 Net financial income 14.5 48.2 6.3 5.7 Other income 14.1 17.0 2.4 4.2 Other expenses (47.1) (76.3) (70.8) (66.0) Result before tax (27.9) (107.8) (133.2) (123.0) Assets under management pension, addition in the period 2,303.8 2,329.8 1,443.4 544.0 Assets under management savings, addition in the period 4,016.6 874.6 193.0 425.2 Assets under management pension in the period 6,674.1 4,370.3 2,040.5 597.0 Assets under management savings in the period 5,697.2 1,680.6 806.0 613.0 Profit margin savings in per cent 2 0.61 0.90 2.07 1.54 Definitions: 1 Underwriting result = earned premiums, net of reinsurance - claims incurred, etc. - operating expenses 2 profit margin savings, in per cent = management income in savings/average assets under management in savings

gjensidige annual report 2010 25 Asset allocation portfolio, group policy MArket share, new policies, defined contribution pension Assets under MAnagement development Bonds held to maturity 27.4% Current bonds 9.0% Money market 0.7% Equities 1.8% Other financial investments 2.4% Bonds, loans and receivables 58.7% Other 4.2 % Vital 9.1 0% Storebrand 9.6 % Sparebank1 5.7 % Danica 35.0% Nordea 8.9% Gjensidige 27.5% NOK million 12,000 10,000 8,000 6,000 4,000 2,000 0 2007 2008 2009 2010 Based on gross premiums written 2010 Source: Finance Norway as at 30 September 2010. Total assets under management at the end of the period. In 2010, the pension profiles achieved an average return of 9.4 per cent. The book return on the paid-up policy portfolio was 5.29 per cent in 2010, whereas the valueadjusted return was 5.1 per cent. The average interest-rate guarantee for the paid-up policy portfolio was 3.5 per cent. Throughout 2010, Gjensidige has had healthy growth within the service Active Management. The target group is institutional customers who want customised solutions and who are covered by special statutory management and reporting requirements. In 2010, there has been a focus on developing good, efficient reporting systems, and priority will be given to further development in 2011. RESULTS Gross premiums written amounted to 2,296.7 nok million in 2010. nok 980.3 of this amount were premiums written and nok 1,316.4 million were transferred funds. Throughout all of 2010, Gjensidige has enjoyed good growth in its customer portfolio, especially for group definedcontribution pensions. In 2009, gross premiums written amounted to nok 2,077.3 million. Earned premiums, net of reinsurance, totalled nok 335.5 million in 2010, compared with nok 116.3 million in 2009. The management income in the savings operations came to nok 22.4 million in 2010, compared with nok 11.2 million in 2009. The increase in revenues is due to increased sales and growth in the savings portfolio. The profit margin for savings ended up at 0.61 per cent in 2010, compared with 0.9 per cent in 2009. This decline is attributed to a more rapid growth in assets under management to institutional customers. For the paid-up policy portfolio, realised profit in addition to guaranteed interest and the increase in additional provisions was divided between the owner and the customers in a ratio of 20/80. The owner s portion of the profit-sharing in 2010 came to nok 9.9 million. Other financial income is the return on equity. Claims incurred totalled nok 258.1 million in 2010 and nok 121.5 million in 2009. In 2010, nok 0.4 million were allocated to the risk equalisation fund, whereas the equivalent figure for 2009 was nok 2.0 million. nok 4.2 million was allocated to additional provisions for the paid-up policy portfolio in 2010, equivalent to 15.0 per cent of the realised return in addition to guaranteed interest (3.5 per cent on the average). nok 13.2 million was allocated to additional provisions in 2009, equivalent to 50 per cent of the realised return in addition to guaranteed interest (3.7 per cent on the average). The additional provision totalled nok 29.5 million at year-end, whereas the securities adjustment reserve amounted to nok 7.4 million. Total operating expenses amounted to nok 156.7 million in 2010, nok 109.6 million of which were insurance-related expenses. The corresponding figures for 2009 were nok 179.0 million and nok 102.7 million respectively. The cost increase in 2010 was mainly attributed to portfolio-related costs within the pension area as a result of increased business volume. The profit/loss before tax was a loss of nok 27.9 million in 2010, compared with a loss before tax of nok 107.8 million in 2009. As operations are still in a development phase, these results were as expected. It is expected that the business area will achieve a profit before tax in 2011. Asset under management Total assets increased by nok 6,320.4 million in 2010 and amounted to nok 12,371.3 million at year-end. Assets under management in the savings business amounted to nok 5,697.2 million. Assets under management in the pension business amounted to nok 6,674.1 million, of which the collective portfolio amounted to nok 2,146.0. OBJecTives and STraTEGies The business area has the objective of achieving an operating profit in 2011: pension and savings should be profitable on its own an important success factor for profitability is substantial growth in assets under management. The Group s general insurance customer base of just under one million customers represents a unique opportunity to succeed with profitable growth through the cross-sale of products in pensions and savings. Pensions and Savings shall function as a support area to the Norwegian general insurance operations: the concentration on pensions and savings shall help increase the range of products for existing general insurance customers in Norway and thereby help improve customer relations and increase loyalty. the concentration on pensions is especially intended for the commercial customers. Pensions and Savings shall exploit the opportunities in an emerging market: in the commercial market, the focus is especially on the market for conversion from defined-benefit schemes to defined-contribution schemes and the transfer market for group defined-contribution schemes. efforts will also be made to increase the volume in the institutional savings market. OUTlooK It is expected that the market for defined-contribution pensions will increase further after the pension reform is implemented effective 1 January 2011. Gjensidige is well-positioned to take part in the expected growth. perspective operations

26 gjensidige annual report 2010 online retail BAnking Gjensidige Bank is a nationwide Internet bank aimed at the Norwegian private and agricultural markets. The bank offers traditional banking products adapted to electronic distribution and is one of the biggest players in consumer finance in Norway. BUSINESS Gjensidige Bank is an Internet bank aimed at the private market in Norway, which was launched in 2007. The bank has offices in Førde and in Oslo, Norway. Gjensidige Bank asa is a wholly-owned subsidiary of Gjensidige Bank Holding as, which in turn is a wholly-owned subsidiary of Gjensidige Forsikring asa. Gjensidige Bank Boligkreditt as is a wholly owned subsidiary of Gjensidige Bank asa. Gjensidige Bank is a bank for customers in the private and agricultural markets and offers: traditional banking products such as daily banking services and savings secured loan products (Home loan and auto loan) unsecured loan products (Consumer loans, credit card and account overdrafts) By combining Internet banking with a local presence, the bank has achieved a unique position compared with other Internet-based banks. Satisfied customers The banking services provided have been wellreceived in the market, and internal measurements of customer satisfaction show that customers are satisfied with Gjensidige Bank. The bank aims to realise the groups s vision: We shall know the customer best and care the most, and it makes continuous, systematic efforts to live up to this vision. Distribution Distribution is via the portal www.gjensidige.no and Gjensidige s 22 financial offices with central locations throughout the country. In addition, the bank s products are offered through its own customer centre. The bank has agreements with Tekna, the Confederation of Vocational Unions (YS), the Norwegian Society of Engineers and Technologists (nito) and the Norwegian Farmers and Smallholders Union (NBS) and offers beneficial products and services to the organisations members. The bank s products are also included in Gjensidige s benefits programme. Through association with the groups brand, customer base and distribution system, the bank differentiates itself from other players in the market. In marketing, the bank has mainly focused on communication with the Group s own customers through direct marketing but has also utilised general marketing channels. Key figures NOK million 2010 2009 2008 2007 Interest income, etc. 782.6 323.3 392.9 75.8 Interest costs, etc. (375.6) (265.8) (347.6) (64.6) Net interest and credit commission income 407.0 57.5 45.4 11.3 Net financial income and other income 37.5 16.5 11.2 6.1 Operating expenses (302.1) (147.2) (134.8) (126.5) Losses on loans/guarantees (109.4) (3.0) (6.8) (6.7) Result before tax 33.1 (76.3) (85.1) (115.8) Gross lending, addition in the period 2,543.9 4,864.2 3,330.0 3,381.4 Deposits, addition in the period 2,569.6 419.1 4,430.3 1,701.1 Gross lending at the end of the period 14,119.5 11,575.6 6,711.4 3,381.4 Deposits at the end of the period 9,120.0 6,550.4 6,131.4 1,701.1 Deposit-to-loan ratio in the period 1 101.0 8.6 133.0 50.3 Deposit-to-loan ratio at the end of the period 1 64.6 56.6 91.4 50.3 Net interest income in per cent 2 2.88 0.63 0.74 0.71 Capital adequacy 3 16.1 17.8 18.7 20.8 Definitions 1 Deposit-to-loan ratio= deposits as a percentage of gross lending 2 Net interest in percent, annualised = net interest and credit commission income and/or average assets under management 3. Capital adequacy = equity and subordinated loan capital / risk weigted capital

gjensidige annual report 2010 27 DEPOSits and lending NOK million Deposits 9,120.0 Lending 14,119.5 quarterly development in the number of of customers 100,000 80,000 60,000 40,000 20,000 net INTEREST INCOME % 3.0 2.5 2.0 1.5 1.0 0.5 0 1q. 2q. 3q. 4q. 0.0 2007 2008 2009 2010 Deposits and lendings at the end of 2010 Development in the number of customers with active use of the bank. Net interest income in per cent = net interest income and credit commission income / average assets under management SIMplificaTion and product DevelopMenT for increased customer satisfaction The consumer loan, Personlån (Private loan), was launched as a new product in April 2010. This is a further development of the consumer loan portfolio that Gjensidige Bank purchased in the autumn of 2009, which continues to be offered under the Gjensidige brand. In addition, Bankid was established. Among other things, this improves the customer experience and makes the dialogue with customers simpler, while supporting the bank s ambitions for customer satisfaction. The bank s business in Oslo related to consumer finance was moved to Gjensidige Forsikring s head office at Sollerud. Furthermore, all customer service functions in the bank are concentrated and located in Førde. The customer growth was steady in 2010, but a rapid increase was reported in the fourth quarter when the customer growth was higher primarily as a result of Bankid, effective marketing of the products Personlån and the high-interest account. At year-end, the bank had 89,594 active customers. 49% of those customers are customers interested in or holding other products and services related to banking and insurance. RESULTS Net interest and credit commission income amounted to nok 407.0 million in 2010, com pared with nok 57.5 million in 2009. The increase is attributed to an increased volume and higher margins. The net interest income relative to average total assets was 2.88 per cent in 2010, compared with 0.63 per cent in the previous year. Operating expenses amounted to nok 302.1 million in 2010, compared with nok 147.3 million in 2009. The cost increase is mainly attributed to a higher cost base as a result of the consumer loan business that was acquired in December 2009. Losses on loans and/or guarantees amounted to nok 109.4 million in 2010, compared with nok 3.0 million in 2009. Collective impairment losses constituted nok 27.6 million of this amount. The increase in collective impairment losses is attributed to estimated expected losses in the consumer loan portfolio. The loss situation is in accordance with expectations and is normal for the portfolio. The profit/loss before tax was a profit of nok 33.1 million in 2010, compared with a loss of nok 76.3 million in 2009. The improvement in earnings is attributed to increased income and better profit margins in the consumer loan portfolio. Deposit-to-loan ratio The deposit-to-loan ratio at year-end 2010 was 64.6 per cent, which was considered satisfactory. At year-end 2009, the deposit-to-loan ratio was 56.6 per cent. A new high-interest product has been well-received by our customers and has made a positive contribution to the increase in deposits in 2010. Capital adequacy The capital adequacy was 16.1 per cent at yearend 2010, compared with 17.8 per cent at the end of the previous year. The bank s lower limit for capital adequacy is twelve per cent. OBJecTives and STraTEGies The business area must be profitable on its own: profitable growth. the bank shall support the Group s long term target for return on equity of 15 per cent before tax Banking shall function as a support area to the Norwegian general insurance operations: the bank shall help strengthen relationships with existing insurance customers in the private and agricultural segment and attract new customer groups to the group: in addition, concentration on banking shall protect the Group s markets shares against competition from bank insurance. OUTlooK Gjensidige has established 21 financial offices throughout the country that offer a broad range of financial services, including banking services. This effort has given the bank substantially increased sales power. The bank will prioritise improving the efficiency of and further developing service models for the sale of banking services through the distribution system of Gjensidige Forsikring. perspective operations

28 gjensidige annual report 2010 HealtH care services Under the brand name Hjelp24, Gjensidige is the largest and leading player in private health services in Norway. Our healthcare personnel are available to the customers round-the-clock every day of the year. OPERATions Our operations cover the whole treatment chain from prevention and risk assessment to rehabilitation and vocational reintegration, and they are organised in four service areas: Corporate health services Hjelp24 HMS is Norway s largest consulting organisation in the fields of corporate health services and Hse (health, safety and environment) with 330 consultants. The operations are nationwide and have a market share of about 20 per cent. Hjelp24 HMS has about 4,600 corporate customers with a total of about 230,000 employees. Private hospital and specialist services Hjelp24 nimi is a private hospital, specialist centre and fitness and rehabilitation centre. Hjelp24 nimi is a leader in health services, lifestyle changes and the treatment of patients with injuries and disorders of the musculoskeletal system. The business also offers a unique programme for persons suffering from morbid obesity. Personal security alarm services Hjelp24 Respons is Norway s largest provider of personal security alarm services and operates a round-the-clock alarm centre with many important services, such as a casualty clinic referral service for several dozen municipalities, psychological services and/or a crisis team, a health visitor phone and referral to and follow-up of health services for Gjensidige s Norwegian insurance activities (Helpline). Work environment surveys Hjelp 24 Consulting is a leading professional institution that provides work environment surveys and consultancy services related to the development and improvement of the work environment in businesses. Diversified customer portfolio The health services are provided to private customers, businesses and the public sector. The portfolio consists of a number of the most respect ed companies in Norway, which gives Gjensidige a unique position. Over 90 per cent of Hjelp24 s total services are provided to the corporate market, including public enterprises. The other 10 per cent of the turnover is from private customers, primarily in the Oslo area, in the fields of fitness, lifestyle and treatment through Hjelp24 nimi s centres at Ullevål Stadium and at Ekeberg. Distribution Hjelp24 is Norway s largest and only nationwide provider of Hse and corporate health services (CHS) with about 40 offices. As a nationwide chain, Hjelp24 has a special opportunity to serve large, nationwide customers. ACQuisiTion results in GroWTH In 2010, Hjelp24 HMS was certified as an authorised corporate health service under the new certification scheme from the Norwegian Labour Inspection Authority. Business enterprises that are required to have corporate health services may only be provided with these services from a certified institution. The demand in the market for corporate health services grew rapidly in 2010 as a result of the enhanced trade regulations for corporate health services, and contracts were signed with almost 400 new corporate customers in 2010. In 2010, the market for private health services was affected by tough price competition related to public procurement. This has resulted in lower prices and margins on renegotiated contracts, but also the loss of individual contracts, where the price reduction was so great that it was not feasible to provide services under the new terms. However, Hjelp24 was able to renew some of its most important contracts. For instance, Hjelp24 Respons renewed a contract for personal security alarms and related services with the City of Oslo. In addition, Hjelp24 nimi won the tender for rehabilitation of seriously owerweigted persons, among other things, from the South-Eastern Norway Regional Health Authority, which means that the programme at nimi Ringerike is assured of Key figures NOK million 2010 2009 2008 2007 Operating income 544.7 509.1 503.9 335.5 Operating expenses (517.3) (476.5) (462.9) (309.1) EBitA 1 27.3 32.7 41.0 26.4 Amortisation other intangible assets (8.3) (6.7) (12.8) EBita-margin in per cent 2 5.0% 6.4% 8.1% 7.9% Definitions: 1 EBita = Earnings before interest, taxes and amortisation 2 EBita-margin in per cent = EBita/operating income

gjensidige annual report 2010 29 health care SERVICES OPERAting INCOME EBitA-MArgin Working environment surveys 3.8% Private hospital and specialist services 22.2% Corporate health care services 56.0% NOK 600 million 400 200 % 9 6 3 Personal security alarm services 18.0% 0 2007 2008 2009 2010 0 2007 2008 2009 2010 Based on operating income 2010 EBita-margin is the earnings before interest, taxes and amortisation divided by operating income continuing operation. The existing large customer contracts have been clarified now, and there are no large customer agreements that have not been clarified at the start of 2011. Several minor acquisitions were completed in 2010. Hjelp24 improved its expertise and scope in analysis and management training through the acquisition of Scandinavian Leadership as. In 2010, Hjelp24 also carried out its first acquisition outside of Norway when the Swedish company Pandora Management AB was acquired in May. Among other things, Pandora operates corporate health services for about half of the employees in the City of Stockholm through its subsidiary St. Erikshälsan. The acquisitions have ensured growth in turnover in a year where the organic growth has trended slightly negative. Hjelp24 was reported to the police for violation of professional secrecy and illegal handling of patient information in connection with a complaint in a competitive tender held during the autumn of 2009. The police investigation is on-going. The company is cooperating with the police in the case and has made all information available. RESULTS Health care services had operating income of nok 544.7 million in 2010, compared with nok 509.1 million in 2009. The increase in operating income in 2010 came mainly as a result of acquisitions conducted in 2010. The organic development was approximately level, which was attributed to tough price competition related to public tendering. This resulted in lower prices and margins on renegotiated contracts, but also the loss of individual government contracts where the price reduction was too great to allow the provision of services under the new terms. Operating expenses amounted to nok 517.3million in 2010, compared with nok 476.5 million in 2009. Part of this increase is attributed to acquired companies. Cost measures were implemented in 2010 as a result of the loss of individual government contracts. These cost measures will first take full effect starting in the first quarter of 2011. EBita for 2010 came to nok 27.3 million, compared with nok 32.7 million in 2009. This gave an EBita margin for 2010 of 5.0 per cent, compared with 6.4 per cent in 2009. The decline in the margin was mainly attributed to the loss of government contracts where it takes some time to adjust the costs to a new income level. OBJecTives and STraTEGies A financial target has been specified for the business area of an annual EBita margin of between six and eight per cent: the business area has yielded profits since start-up. Further measures focused on income and expenses shall help yield a profit within the targeted EBita margin. This business area shall function as a support area for the Norwegian general insurance operations: the efforts in this area shall help increase the range of products for existing general insurance customers in Norway and thereby help improve customer relations and increase loyalty. Health care services are especially aimed at the commercial customers where there is a cross-sales potential. The current leading position in the private health market shall be maintained: the market leader position shall be utilised in a growing market. the product portfolio shall be adapted to the customers demand for health care services. OUTlooK Many factors may promote increased demand for health care services in the coming years: the demographic trend indicates that the number of persons in Norway over age 67 will increase significantly in the coming years. the authorities have targeted a reduction in the absence due to illness. in recent years, the average waiting period (measured in number of days) at public hospitals has increased every year. The authorities have signalled that private institutions may be made use of when necessary in order to reduce the waiting period and prevent failure to meet deadlines. there has also been a substantial growth in recent years in the number of persons with private health insurance. The trend indicates that in all probability private health services will play an increasingly important role in the Norwegian health system in the coming years. In connection with updating the group s strategy, the Board of Directors has requested that the management assess whether the health care services segment should remain a wholly-owned part of the Group s broad-based activities in Norway. perspective operations

30 gjensidige annual report 2010 Asset MAnagement The objective of the investment portfolio is primarily to cover the actuarial provisions. The portfolio consists of investments in a number of asset classes, including bonds and money market instruments, property and shares. At year-end 2010, the portfolio amounted to NOK 52,347.0 million. FRAMEWorKS for the Asset ManaGEMenT The Group s investments are made primarily to cover the actuarial provisions, but the Group is in a capital situation that allows it to invest on the basis of the maximum return given the Group s risk tolerance for its equity. In the strategic allocations, efforts are made to acquire a diversified portfolio in order to achieve a return in keeping with the Group s financial objectives. The Board of Directors sets the maximum and minimum limits per asset class once a year, as well as limits for interest rate, liquidity and currency risk. The Group s credit risk associated with investment portfolios and liquidity portfolios is managed through the specification of limits by the credit committee on the basis of the Group s credit policy. The asset allocation and individual investments must be kept within these limits at all times. In addition, the Board of Directors specifies a minimum return that shall be achieved with a given degree of probability. The actual asset allocation will vary throughout the year within the given degrees of freedom so as to utilise the market opportunities and active management of the various asset classes. The implementation is based on extensive use of external managers as well as some internal management for Nordic equities and tactical allocation. Real estate investment in Norway is made through the whollyowned property management company, Oslo Areal. The investment portfolio The Group s investment portfolio amounted to nok 52,347.0 million at year-end 2010, compared with nok 50,669.1 million at year-end 2009. The investment portfolio includes all investment funds in the Group, except for Gjensidige Bank and Gjensidige Pensjon og Sparing. The fixed-income portfolio The fixed-income portfolio amounted to nok 37,611.4 million at year-end 2010, compared with nok 37,859.0 million at year-end 2009. The fixedincome portfolio consists of four sub-portfolios: money market instruments (15.8 per cent), current bonds (22.0 per cent), bonds held to maturity (26.6 per cent) and loans and receivables (7.5 per cent). In the current bond portfolio, convertible bonds amount to nok 523.3 million and Danish mortgage bonds amount to nok 6,607.7 million. The counterparty risk in the fixed-income portfolio breaks down into 20.1 per cent central government and other public sector, 62.1 per cent banks and financial institutions and 17.8 per cent industrial concerns. Key figures An overview of the ten largest issuers as per 31 December 2010 and 31 December 2009 is included in note 3, tables 20a and 20b. An overview of the breakdown of the fixed-income portfolio by rating category is presented in note 3, tables 19a and 19b. The percentage of bonds held to maturity was 26.8 per cent as the percentage of the total investment portfolio at year-end 2010 compared with 29.9 per cent at year-end 2009. NOK million 2010 2009 2008 Result Equities 214.7 45.3 (1,646.9) Associated companies 488.7 263.3 188.2 Money market 193.4 357.4 880.1 Current bonds 595.9 1,323.0 (229.7) Bonds held to maturity 776.6 801.7 516.6 Loans and receivables 149.3 14.8 Property 359.2 5.8 350.3 Hedge funds and other financial investments 98.5 83.6 (85.8) Other financial items 1 (116.0) (100.9) (207.3) Management costs (55.8) (70.8) (43.5) Financial results for the investment portfolio 2,704.6 2,723.2 (277.9) BAlance sheet Equity 2,500.3 1,827.6 1,139.0 Shares in associated companies 4,275.5 3,780.9 2,662.9 Money market 8,274.8 10,121.8 11,324.3 Current bonds 11,522.5 11,194.1 11,550.9 Bonds held to maturity 13,910.3 15,178.4 13,710.3 Loans and receivables 3,903.8 1,364.7 Property 6,445.1 6,030.5 6,324.4 Hedge funds and other financial investments 1,119.7 1,244.8 1,243.0 Other financial items 1 395.0 (73.7) (183.0) Book value 52,347.0 50,669.1 47,771.8 Definitions: 1 this item mainly consists of the discounting effects of the insurance liabilities in Denmark, mismatches between interest-rate and inflation adjustments on the liability side in Denmark versus interest-rate and inflation hedging and currency hedging of Gjensidige Sweden and Gjensidige Baltic. The carrying amount corresponds to the market value of interest-rate and inflation swaps in Denmark.

gjensidige annual report 2010 31 Return by asset classes Asset allocation at year-end development IN Asset allocation 15 12 9 6 3 0 Shares Associated companies Moneymarket Current bonds Bonds held to maturity Loans and receivables Property Hedgefunds and other financial investments Property 12,3% Hedgefund and other fin. instruments 2,8% Loans and receivables 7,5% Shares 4,8% Associated companies 8,2% Money market 15,8% Bonds held to maturity 26,6% Current bonds 22,0% 100% 80 60 40 20 0 2006 2007 2008 2009 2010 Property Hedgefund and other fin. invest. Loans and receivables Bonds held to maturity Current bonds Money market Associated companies Shares Return by asset classes 2010 Gjensidige s investment portfolio split in the various asset classes at the end of 2010 Development in asset allocation at the end of the period. For 2008-2010, shares are split into shares and shares in associated companies. For 2006-2007, all shares are reported together An overview of the maturity structure of the fixedincome portfolio is presented in note 3, table 13. Equity and investments in associated companies At year-end 2010, equity exposure was nok 6,775.8 million and consisted of shares of Storebrand, equity certificates in SpareBank 1 sr-bank, short-term investments, and fund investments in private equity. At year-end 2009, the equity portfolio amounted to nok 5,608.5 million. The Group s investments in associated companies amounted to nok 4,275.5 million at year-end 2010 and mainly consisted of the investments in Storebrand and SpareBank 1 sr-bank, recognised at nok 3,287.8 million and nok 958.9 million respectively. Investments in associated companies are recognised in accordance with the equity method. Private equity fund investments were recognised at the best estimate of fair value. The basis for valuation is the European Venture Capital Association s (EVCA) Valuation Principles. To compensate for late reporting, corrections are made for known events such as payments and disbursements, known changes in value such as the observed stock market price, and any other known events. At year-end 2010, the investments in private equity amounted to nok 1,134.9 million compared with nok 817.7 million at year-end 2009. This increase in exposure to private equity is attributed to the increase in value and new investments. An overview of the ten largest exposures to equity as per 31 December 2010 and 31 December 2009 is included in note 3, tables 10a and 10b. An overview of the five biggest private equity investments is included in note 3, table 12a and 12b. The real estate portfolio Real estate investments amounted to nok 6.445,1 million at year-end 2010, compared with nok 6,030.5 million at year-end 2009. This increase is attributed to a net purchase during 2010. The investments are concentrated in office properties in Oslo, but also include shopping centres and office properties in other Norwegian cities as well as two office buildings in Copenhagen, Denmark. In addition, a small portion of the portfolio was invested in international real estate funds. The exposure to the ten biggest real estate investments as per 31 December 2010 and 31 December 2009 is included in note 3, table 15. Hedge funds The exposure to hedge funds amounted to nok 756.6 million as per 31 December 2010 compared with nok 532.5 million the previous year. The hedge funds are used as aggressive management styles in interest rates, shares, raw materials and allocation. An overview of the five biggest hedge-fund exposures as per 31 December 2010 and 31 Dec ember 2009 is included in note 3, tables 16a and 16b. NET income from investments The financial results for the investment portfolio came to nok 2,704.6 million in 2010, compared with nok 2,723.2 million in 2009. The financial return was 5.2 per cent, compared with 5.5 per cent in 2009. The fixed-income portfolio The return for the fixed-income portfolio ended up at 4.5 per cent in 2010, compared with 6.6 per cent in 2009. This does not include changes in value for the hold-to-maturity portfolio and the loans and receivables portfolio. The fixed-income portfolio has not been subject to losses resulting from bankruptcies of our debtors in 2010. Equity and investments in associated companies All in all, the investments in equity and associated companies yielded a profit of nok 703.4 million in 2010 compared with a profit of nok 308.6 million in 2009. A profit of nok 488.7 million from associated companies was recognised in 2010, 342.2 million of which comes from the investment in Storebrand and 142.1 million from the investment in Spare- Bank 1 sr-bank. The private equity portfolio yielded a result of 210.4 million in 2010, compared with a loss of nok 26.5 million in 2009. The real estate portfolio The real estate portfolio yielded a profit of nok 359.2 million in 2010 compared with nok 5.8 million in 2009. The current income in the real estate portfolio amounted to nok 422.7 million in 2010. The average required rate of return in the valuation of the real estate portfolio was reduced during the year, from 6.75 per cent to 6.6 per cent as per 31 december 2010. In addition, a negative value adjustment of 36.1 million was made for the international real estate funds in 2010. Effect on equity of possible scenarios: NOK million 31.12.2010 31.12.2009 31.12.2008 The equity portfolio: 10 per cent drop in share prices 1 (250.0) (182.5) (86.9) The fixed-income portfolio 100 bp parallel shift up 2 (274.1) (347.2) (295.7) The real estate portfolio: 10 per cent drop in market rent (372.9) (409.7) (426.0) The real est. portf.: 25 bp increase in required rate of return (221.5) (210.2) (214.0) 1 storebrand and SpareBank1 sr-bank are recognised as associated companies. Since a ten per cent drop in the share price will not result in impairment in the balance sheet, the items have been excluded from the sensitivity calculation. 2 does not include the fixed asset portfolio or the effect of the swap agreements in Gjensidiges Arbejdsskadeforsikring (has the opposite effect on liabilities). perspective operations

32 gjensidige annual report 2010 additional information key figures 2010 2009 2008 2007 GJENSIDIGE insurance group Return on financial assets 1 % 5.2 5.5 (0.6) 6.3 Equity (restated for 2009) nok million 23,137.8 21,968.2 19,585.9 20,302.5 Return on equity - annualised 2 (restated for 2009) % 14.4 15.2 1.5 15.4 Capital adequacy ratio 3 (restated for 2009) % 16.1 18.9 20.7 26.1 Solvency margin Gjensidige Forsikring 4 (restated for 2009) % 581.2 713.8 642.2 561.3 Share capital Number of outstanding shares at the end of the period Number 500,000,000 500,000,000 The period s earning per share (restated for 2009) nok 5.90 4.61 general insurance Market shares non-marine insurance Norway (Fno) % 27.9 28.4 30.1 31.0 Gross premium written private nok million 8,618.9 8,035.3 8,010.6 7,910.6 Commercial nok million 4,670.3 5,003.8 5,120.0 5,464.7 Total Norway nok million 13,289.2 13,039.1 13,130.6 13,375.3 nordic nok million 3,812.4 2,657.3 2,155.5 1,810.4 Baltic nok million 395.2 592.2 657.7 432.6 eliminations nok million (30.0) (90.2) (77.8) (388.2) Total nok million 17,446.8 16,198.3 15,866.0 15,230.0 Premiums, net of reinsurance 5 % 97.4 97.5 98.0 98.4 Earned premiums, net of reinsurance private nok million 8,279.4 7,856.2 7,911.4 7,729.8 Commercial nok million 4,418.5 4,737.3 4,909.7 5,072.7 Total Norway nok million 12,697.9 12,593.5 12,821.1 12,802.5 nordic nok million 3,906.1 2,403.5 2,068.4 1,685.3 Baltic nok million 459.3 663.4 592.4 360.2 Total nok million 17,063.3 15,660.4 15,481.9 14,848.0 Loss ratio, net of reinsurance 6 Private % 76.1 76.5 73.3 74.5 Commercial % 81.5 80.6 85.9 85.4 Total Norway % 78.0 78.0 78.1 78.8 nordic % 83.3 76.3 77.6 81.7 Baltic % 66.5 62.0 62.7 64.2 Total % 78.9 77.1 77.4 78.8 Cost ratio, net of reinsurance 7 Private % 14.4 16.5 16.9 17.8 Commercial % 12.9 12.9 12.8 12.8 Total Norway % 15.3 17.0 16.4 15.8 nordic % 18.7 17.4 17.0 21.4 Baltic % 29.8 31.9 31.0 31.6 Total % 16.5 17.7 17.0 17.5 Combined ratio 8 Private % 90.5 93.0 90.2 92.3 Commercial % 94.4 93.6 98.8 98.2 Total Norway % 93.3 95.0 94.5 94.6 nordic % 102.0 93.6 94.5 103.1 Baltic % 96.2 93.9 93.7 95.8 Total % 95.3 94.8 94.4 96.3

gjensidige annual report 2010 33 key figures 2010 2009 2008 2007 PENSion and savings Assets under management pension, addition in the period nok million 2,303.8 2,329.8 1,443.4 544.0 Assets under management savings, addition in the period nok million 4,016.6 874.6 193.0 425.2 Assets under management pension at the end of the period nok million 6,674.1 4,370.3 2,040.5 597.0 of which the group policy portfolio nok million 2,146.0 1,514.6 620.1 Assets under management savings at the end of the period nok million 5,697.2 1,680.6 806.0 613.0 Profit margin savings in per cent 9 % 0.61 0.90 2.07 1.54 Recognised return on paid-up policies portfolio 10 % 5.29 5.97 (3.20) Value adjusted return on paid-up policies portfolio 11 % 5.10 7.08 (3.20) Number of customers (pension), addition in the period Number 14,813 17,988 17,462 9,833 Number of customers (savings), addition in the period Number (2,191) 310 1,240 3,184 Number of customers (pension), at the end of the period Number 66,468 51,655 33,667 16,205 Number of customers (savings), at the end of the period Number 5,479 7,670 7,360 6,120 Customers (pension) with insur. agreem. at the end of the per. Number 56,498 43,907 28,617 13,126 Customers (savings) with insur. agreem. at the end of the per. Number 4,493 6,282 6,028 5,080 perspective operations Online retail Banking Gross lending, addition in the period nok million 2,543.9 4,864.2 3,330.0 3,381.4 Deposits, addition in the period nok million 2,569.6 419.1 4,430.3 1,701.1 Gross lending, at the end of the period nok million 14,119.5 11,575.6 6,711.4 3,381.4 Deposits, at the end of the period nok million 9,120.0 6,550.4 6,131.4 1,701.1 Deposit-to-loan ratio in the period 12 % 101.0 8.6 133.0 50.3 Deposit-to-loan ratio at the end of the period 12 % 64.6 56.6 91.4 50.3 Net interest income in per cent 13 % 2.88 0.63 0.74 0.71 Customers, addition in the period 14 Number 13,649 31,532 22,169 22,244 Customers, at the end of the period 14 Number 89,594 75,945 44,413 22,244 Customers with insurance agreement at the end of the period Number 43,764 36,000 23,438 11,516 Capital adequacy 15 % 16.1 17.8 18.7 20.8 health CAre services EBita 16 NOK million 27.3 32.7 41.0 26.4 EBita-margin in per cent 17 % 5.0 6.4 8.1 7.9 1 Return on finanical assets = Net financial income in per cent of average financial assets including property, excluding Gjensidige Bank and Gjensidige Pensjon og Sparing. 2 Return on equity = Profit before tax for the period / average adjusted equity for the period. 3 The equity certificates share of the profit or loss for the period / average number of outstanding equity certificates in the period 4 The solvency margin is calculated at the company level and in accordance with the rules of the Financial Supervisory Authority of Norway. 5 Premiums, net of reinsurance = earned premiums, net of reinsurance / gross premiums written (total general insurance operations) 6 Loss ratio, net of reinsurance = claims incurred, net of reinsurance / earned premiums, net of reinsurance 7 Cost ratio, net of reinsurance = insurance-related operating expenses / earned premiums, net of reinsurance 8 Combined ratio = loss ratio, net of reinsurance + cost ratio, net of reinsurance 9 Profit margin savings, in per cent = management income for the period / average assets under management for the period 10 Recognised return on paid-up policies portfolio = realised return on the portfolio 11 Value adjusted return on paid-up policies portfolio = total return on the portfolio 12 Deposit-to-loan ratio = deposits as a percentage of gross lending. 13 Net interest income in per cent = Net interest income and credit commission income / average assets under management 14 Registered customers include customers who have signed up to be customers during the last three months (started the become a customer process) and customers that actively use the bank. The method of measurement was changed from 1 January 2009. Prior to this, customer records older than six months were extracted 15 Capital adequacy = primary capital / calculation basis for credit risk, market risk and operational risk 16 EBITA = Earnings before interest, taxes and amortisation 17 EBITA margin in per cent = EBITA / operating income

34perspective

gjensidige annual report 2010 35 employees Gjensidige is a customer-oriented company. Customer orientation requires skilled, motivated employees, who have what it takes to go all out for the customer. Therefore, Gjensidige is going in for skills development and improvements in the working environment. Gjensidige shall be a health-promoting workplace where employees can develop professionally. Satisfied employees In the autumn of 2010, the whole group took a personnel satisfaction survey (pss) devised by the company, Sensus, which is a part of Gjensidige s subsidiary Hjelp24. The results have been compared with a group of 75 Norwegian companies with a total of 17,000 employees. Among the results, it is worth noting: the response percentage was 91 for the Group, which is very high. With the exception of Gjensidige Denmark, where the restructuring in the autumn of 2010 has clearly affected the results, the score for the Group is good. the employees are satisfied with the management in the Group. A result of 78 (on a scale of 1-100) is well above the average in the basis for comparison. the social interaction among the employees is also good, with a score of 77. This too is well above the average in the reference group. the employees in Gjensidige experience more demanding job requirements than the reference group at the same time as fatigue on the job is a little lower than the average. That indicates that the job requirements do not have a detrimental effect on people s health. The individual manager presents the pss results for his/her employees. The employees then work on this according to a pre-determined process and shall end up with: an area that already functions well and certain measures that ought to be taken in order to maintain this. an area where there is room for improvement and certain measures that ought to be taken in order to achieve this improvement. A schedule shall be drawn up for these measures. If they are not continuous, they shall be completed by 1 April 2011. theoretical and practical tests in accordance with Finance Norway s (Fno s) certification scheme. In order to be certified, they have to take a theoretical and a practical test, which documents sufficient knowledge about: the Company s products safety regulations and prevention of loss causes of damage and claims settlement ethics, communication and customer orientation regulations and industry-wide agreements. In Gjensidige, the requirements were set somewhat higher than in the Fno s standard scheme. 496 advisers passed the examination and were certified in 2010. Thus, with the exception of employees who were absent due to leave or illness, all of the advisers were certified by year-end. Holding examinations and the necessary education and training has made great demands on both the organisation and the individual employee. Naturally many of them were nervous before taking the exam. The certification scheme serves as a quality assurance that will benefit both the customers and the certified advisers. By year-end 2010, all of Gjensidige s investment advisers were certified in accordance with the certification scheme for financial advisers. This is a more extensive scheme that requires training roughly equivalent to a half year of full-time study. Decrease in absence due to illness In 2010, absence due to illness amounted to 5.2 per cent in the Norwegian insurance business. The corresponding figure for the entire Group was 4.4 per cent. Systematic efforts have been made to re duce the absence due to illness to the targeted level, which is 4 per cent for the Group. The Company s aim is to make the workplace health-promoting. for all areas. Continuous efforts are being made at all levels to promote prevention, follow-up, measures and education and training. Indoor air quality and ergonomics are target areas for preventing musculo-skeletal disorders and injuries. In general, Gjensidige has enjoyed a positive trend in absence due to illness, which indicates that the initiated measures have been effective. Personnel, Hse and Manager Manuals are distributed electronically and updated and/or revised regularly. Recruitment out of the ordinary Gjensidige has chosen to recruit salespersons and advisers in blocks. In 2010, two rounds of recruitment were carried out, in which a total of just under 40 people were hired. The Company has good experience with this recruitment method, and the feedback from the applicants has also been good. The block method entails that groups of applicants are called in simultaneously and participate in interviews, group discussions and case work. Those who are hired go right into Gjensidige s Customer and Brand School so that they are given education and training right from the start. This method entails that Gjensidige can use more resources on all steps in the process, from advertising the positions to testing the applicants and training new employees, than was the case with traditional recruitment methods. More employees in Denmark In the spring of 2010, Gjensidige acquired the Dan ish company, Nykredit Forsikring. At the same time as the acquisition, a strategic distribution agreement was signed with Nykredit, which ensures Gjensidige access to more than one million Nykredit customers. perspective Only certified advisers All insurance advisers and their managers shall take Status and measures will be regularly reviewed by the group management and management teams With this acquisition, Gjensidige gains a market share in Denmark of almost six per cent, which

36 gjensidige annual report 2010 significantly improves its strategic presence in Denmark. The number of employees has also increased substantially. Gjensidige now has 486 employees in Denmark. Most of them work at Gjensidige s Danish head office in Copenhagen, but there is also a department in Århus. The merger of the two organisations com menced immediately under the name of Project Fellowship and was completed in the course of a few months. Unfortunately, this project also entailed that the Group had to dismiss employees from both organisations. Project Fellowship involves the establishment of a common it and service platform for all of the employees. Most important of all, employees and managers have taken the initiative in the project and formed an organisation with the focus on customer service and profitable growth. Competence enterprise of the year Gjensidige was awarded the Competence Award for 2010 by HR Norway, which is a member organisation for all those who work with human resources and management in Norway. The jury explained the award as follows: The Competence Award for 2010 is awarded to Gjensidige Forsikring on the basis of the Company s comprehensive and systematic efforts to develop skills over a period of time. Skills development in Gjensidige Forsikring is closely related to the Company s overall strategy. The group management is strongly committed to these programmes for all levels of the organisation. The opportunities for skills development are highly valued among current employees and serve as a competitive advantage during recruitment. In addition, emphasis is given to Gjensidige s concentration on block recruiting, Gjensidige s Customer and Brand School, management development and integrated e-learning. In Gjensidige, newly hired salespersons and advisers go directly into a training programme. For most of these persons, the training will lead to an examination as part of the general insurance companies certification scheme for salespersons and advisers. Subsequently, ongoing skills development is offered in the form of courses and e-learning. For those who have management responsibility, there are separate training programmes that emphasise management skills. The focus on skills development is a key part of Gjensidige s brand building. The customers shall feel that the Company offers better counselling and service than our competitors. This cannot be achieved without employees who have sufficient expertise and motivation. The awarding of the Competence Award for 2010 is regarded as a recognition of efforts that have been underway for many years and that are still developing. The Gjensidige Academy In the spring of 2009, Gjensidige established its own school - the Customer and Brand School - which was delegated responsibility for internal skills development, especially in sales and settlement. The school enabled skills development to become more structured and focused than previously, and it quickly became very popular. Feedback unanimously showed that the school s courses yielded good results in the form of better performance. Some employees with long service have been sceptical about wasting time on schooling. Without exception, this kind of scepticism has been shown to be groundless. In 2010, 567 employees took courses at Gjensidige s Customer and Brand School. 5,600 course days were held, and over 700 examinations were given. In the spring of 2010, the Gjensidige School made a strong contribution to Gjensidige s receiving HR Norway s award for competence enterprise of the year. In the autumn of 2010, a decision was made to further increase the funding of skills development by establishing the Gjensidige Academy. The Customer and Brand School is part of the Academy together with management training, Gjensidige s e-learning programme and other competence-building measures. The Academy has its own administration, which reports to a Board of Directors consisting of members of Gjensidige s group management. The ties to the group management reflect the key role that the Academy plays in Gjensidige s strategy. The Company shall differentiate itself from its competitors by having competent employees who can and will give the customers a better experience than they expect. The objectives of the Gjensidige Academy are to: Help give Gjensidige a competitive advantage by establishing the best funding of skills development in the industry and enhancing Gjensidige s standing as an attractive employer through competent, motivated managers and employees, we want to improve Gjensidige s ability to develop and adapt in order to ensure results-driven operations in all units. develop correct conduct and attitudes in keeping with the Group s values. arouse motivation for professional development, a good working environment and a common learning arena in the Group. Help employees and managers quickly attain a proper level of competence. Senior policy, age limit and court case Gjensidige has an active senior policy that aims to get as many employees as possible to work until they turn 67. An important measure for seniors has been the opportunity to work in a 90 per cent

gjensidige annual report 2010 37 position with full salary or in an 80 per cent position with 90% salary. The scheme is under evaluation. Among other things, it is being assessed in light of the pension reform. Those who so desire are entitled to flexible working hours and other arrangements. Gjensidige also has an occupational pension scheme that is one of the best in Norway. Together with the age limit, these measures constitute a comprehensive package. perspective Since 1972, Gjensidige has had an upper age limit of 67 for its employees. In the autumn of 2009, the Company was sued by an employee who wanted to remain in her position after turning 67. Oslo District Court found in favour of the employee when they heard the case in April 2010, but the Company appealed. In December, the Borgarting Court of Appeal handed down a judgment in Gjensidige s favour. The employee and the Finance Sector Union of Norway have appealed to the Supreme Court. The employee will remain in her position until the judgment is final and conclusive. The question of an age limit is an important matter of principle for Gjensidige and for much of the rest of the Norwegian labour market. The Norwegian Employers Association for the Financial Sector (FA) has declared third-party intervention in support of Gjensidige and has helped the Company with legal assistance during the hearing. In addition, the Norwegian Confederation of Trade Unions (lo) and the Confederation of Norwegian Enterprise (NHO) have gotten involved and inquired jointly with the Ministry of Labour for a clarification with regard to company-determined age limits. The issue became relevant when the rules concerning coordination of pension and income from employment for the age group between 67 and 70 were gradually amended starting in 2008. This is also an issue related to the introduction of a new pension reform. If the age limit of 67 should be waived, the statutory age limit will be 70. Together with the opportunity to retire with a pension at age 62, this kind of age limit will make the need for recruitment less predictable. It might also require amendments in measures for seniors and/or the pension scheme. The age limit of 67 must be consistently enforced in order to be legal, so it has not been relevant to make exceptions for those who have insisted on continuing in their positions.

38 gjensidige annual report 2010 Gjensidige and society We safeguard life, health and assets and relieve our customers of risk. We replace whatever can be replaced when the customer s house catches fire or a car is involved in a collision. We prefer to help the customer to avoid fires and other accidents. Our business is a social responsibility in itself, and it is a natural social responsibility to ensure that the whole society can benefit from our expertise in loss prevention. In this context, the media play an important role. In 2010, Gjensidige contributed to almost 500 newspaper articles and items on TV and radio about the prevention of loss. TrAFFic accidents took 210 lives in 2010, and 673 people were seriously injured. Fortunately, the number of mortalities and injuries is declining, but far too many lives are still being destroyed on Norwegian highways. Gjensidige has gotten involved in research, awareness campaigns and education and training. We also think there is a need for upgrading the highway network and that this is a task to which the government authorities ought to provide more funding. Since 2007, we have supported Jentenes trafikkaksjon (the Girls Safe Driving Initiative), which is a project under the direction of the Norwegian Council for Road Safety. Girls are consistently safer drivers than boys. The purpose of the initiative is to motivate girls to demand safer driving when they get in a car with a male driver. 9,000 girls are now members of Jentenes trafikkaksjon. One of the most important measures to induce young people to become safer drivers is training in the company of an adult. This kind of training develops experience under controlled conditions and increases awareness and understanding. Therefore, Gjensidige gives better premiums to young drivers who participate in volume training programmes. We handed out 18,600 reflective vests and 60,000 reflectors to day care facilities and school children. This advertising campaign was organised as a collective voluntary effort among the Company s employees and has generated considerable enthusiasm. We support the eu project, Prologue, which is supposed to look into the possibility of conducting a larger survey of Europeans driving behaviour. The Norwegian part of the project was conducted by the Norwegian Institute of Transport Economics. Increased insight into the causes of dangerous driving behaviour will hopefully lead to more measures to prevent this behaviour that are also more precise. The elderly are especially vulnerable in traffic. Gjensidige is supporting a pilot project in which selected persons are urged to participate in the refresher course 65+ for elderly drivers, which is held by the Norwegian Public Roads Administration in cooperation with the Adult Education Association and other educational institutions. Gjensidige also assists the University of Oslo and the Norwegian Institute of Transport Economics in a research project that is supposed to measure the effects of being over age 65. Each year, house fires claim between 60 and 70 lives in Norway and are a major source of stress even when no lives are lost. Fire prevention has been an important task in Gjensidige throughout the Company s entire history. In 2010, Gjensidige conducted Aksjon Boligbrann (a nationwide information campaign to help prevent fires in the home) in collaboration with the Norwegian Fire Protection Association, the Directorate for Civil Protection and Emergency Planning (dsb) and local fire brigades. This is an annual campaign

gjensidige annual report 2010 39 where a fire inspection is conducted, information about fire is furnished to the residents and smoke detector batteries are handed out. In 2010, about 40,000 homes were visited in connection with this campaign. A fire calendar was also handed out, in which the Norwegian Women s Handball Team demonstrates fire prevention in the home. Our commitment to fire prevention among elderly persons who still live at home was continued in 2010. This is a group of people who are especially vulnerable to fire. A joint project with the City of Oslo and the Oslo Fire and Rescue Department in which domestic help undertakes an annual fire inspection has had good results. In cooperation with dsb and the Norwegian Fire Protection Association, we helped develop and market educational materials on fire prevention for the Norwegian school system. Gjensidige is represented on a number of councils, committees and boards and contributes regularly to the improvement of the regulations. Water damage does not claim lives, but it causes substantial damage to society. Gjensidige actively cooperates with government authorities, researchers and trade organisations in Norway and the Nordic countries on damage prevention measures. One example of this is that for many years we have been involved in influencing the Building Regulations to promote greater damage prevention. Among other things, this has resulted in the specification of mandatory requirements in new Building Regulations in 2010 that equipment and pipes connected to water mains in rooms without a watertight floor shall be protected against water damage, e.g. with an automatic water shut-off valve. Ski helmets are now used by almost all children under age 14, and their use is also rapidly increasing among adolescents and adults. Through the cooperation that Gjensidige has established with the Norwegian Ski Area Association, we supply many alpine facilities with helmets, which are lent free of charge to children and youth. Over a period of 15 years, Gjensidige has furnished nearly 20,000 helmets. According to the Norwegian Ski Area Association, the use of helmets has increased by 60 per cent in recent decades. Physical exercise is important for both mental and physical health. Gjensidige is the main sponsor of the Norwegian Women s Handball Team. In cooperation with the Norwegian Handball Association, we arrange handball schools for children and young people. In 2010, these handball schools attracted about 4,000 participants during the winter school holiday and just as many during the autumn school holiday. We furnish athletic clubs in handball, football and Nordic skiing with uniforms. GloBAl climate change will affect our business through more frequent damage caused by extreme weather. For many years, Gjensidige has helped acquire new information about the impacts of climate change. In 2010, we cooperated with the Norwegian Computing Centre and the London School of Economics on a project that aims to describe local effects of global warming. Gjensidige has endorsed the national climate change campaign, Klimaløftet (the Climate Pledge), which is an action programme under the direction of the Norwegian Ministry of the Environment. Among other things, it entails that we commit ourselves to conduct a greenhouse gas audit, draft action plans and compensate fully or partially for our own emissions by purchasing carbon offsets. In 2010, Gjensidige s operations resulted in emissions of 3,028 tonnes of CO 2, which is roughly equivalent to our emissions in 2009. Polluting emissions from Gjensidige s activities are modest. All of our offices with more than 30 employees shall be certified as Environmental Lighthouses. At year-end 2010, four of our offices were Environmental Lighthouses, and seven more are expected to be certified in 2011. Each year, we try to reduce our consumption of energy and other resources. In 2010, our energy consumption was 14.1 million kwh, which amounted to a reduction of 3 per cent from 2009. The reason why the reduction was not larger was mainly attributed to the cold winter at the beginning of 2010 and another cold period in November and December. Video conferences are an effective way to reduce emissions related to travel. In 2010, 11,334 hours of video conferences were held, which was an increase of 35 per cent from the previous year. We used 248 tonnes of paper, which was 27 per cent less than in 2009. 405,700 customers have elected to receive documents electronically instead of on paper. This amounts to a doubling since 2009. The working environment at Gjensidige shall help promote good health. The absence due to illness should be lower than 4 per cent. There is a good gender balance in the Company as a whole, with 54.4 per cent men and 45.6 per cent women. The percentage of women in management is lower, but increasing. In 2010, two out of eight members of the group management were women. The customers are our reason for existing. In 2010, we improved our score in the Norwegian Customer Barometer Survey, which measures our customers satisfaction. Both in the private and corporate markets, customer satisfaction came close to the ambitious goals we had set. In keeping with requirements from the industry, those who serve the customers shall either be certified financial advisers or have passed an examination from the financial sector s certification scheme. At year-end 2010, all of Gjensidige s salespersons and advisers were certified or approved, with the exception of employees who were absent due to illness or on leave. perspective

40 gjensidige annual report 2010 Key Figures social responsibility Target group subject Status 2009 Status 2010 target2010 target2011 VAlue creation and resource use Owners Return on equity before tax 15.2% 14.4% >15% >15% Dividend (NOK million)* 1,650 2,350 - - Dividend payout ratio* 72% 80% 50-80% 50-80% Customers Customer satisfaction (KTI) retail 72 72 74 74 KTI Corporate 70 70 72 72 Financial advisors authorised 47% 93% 100% 100% Insurance advisers certified 15% 97% 100% 100% Environment Energy consumption in MWh 14.4 14.1 13.0 12.7 Working environment CO 2 -emission in tonnes 3,023 3,028 2,872 2,877 Square meters in use 73,839 66,964 66,482 63,616 Offices certified as Eco lighthouses 2 4 5-7 11 Videoconferences, hours 8,423 11,334 10,000 12,500 Paper consumption in tonnes 342 248 308 223 Paperfree customers 200,000 310,000 500,000 430,000 Employees Women 46% 45.6% Ca. 50% Ca. 50% Ethics Employees Female managers 36% 35% Increase Increase Sickness absence 5.2% 5.0% 4% 4% Average amount spent on training (NOK) 10,000 10,420 11.300 10.420 Average retirement age 62.3 år 62.9 år Policies, measures regarding impartiality, bribery and ethics Control Continued Suppliers Fair competition/ anti corruption Control Continued Taxes and fees - Vat registered, no illegal labour Control Continued Personal statement regarding environment and social responsibility for suppliers Yes Yes Continued Human Rights Asset management The Group s own financial investments follow international rules for Socially responsible investments (sri) * Based on the Board of Directors recommendation.

gjensidige annual report 2010 41 THE gjensidige FoundAtion The Gjensidige Foundation is a unique foundation. It is the largest in Norway, and it plays two important roles. One of these roles is relatively new and involves the foundation s performance in its capacity as an important financial institution, while the other role is the continuance of Gjensidige Forsikring s long tradition as an important contributor to various socially beneficial objectives. In June 2010, the Gjensidige Foundation was converted from a general foundation to a financial foundation. This was a consequence of Gjensidige Forsikring s simultaneous conversion to a public limited company (asa). Up to year-end 2010, the Gjensidige Foundation owned all of the shares in Gjensidige Forsikring. In connection with the stock exchange listing of Gjensidige Forsikring on 10 December 2010, the foundation conducted a selldown, and Gjensidige Forsikring attracted about 52,300 new shareholders. The foundation owned at year-end about 61.7 per cent of the shares in Gjensidige, and it is stipulated in the Articles of Association that its ownership shall be long-term and that it has the goal of owning at least 60 per cent. The Gjensidige Foundation s financial goals involve distributing a dividend to Gjensidige Forsikring s general insurance customers and managing the investment income from the sell-down of shares in Gjensidige Forsikring. For the 2009 financial year, Gjensidige Forsikring paid out a total of about nok 1.2 billion in dividends to its customers. Starting in the 2010 financial year, the customers dividend from Gjensidige Forsikring will be distributed by the Gjensidige Foundation. The foundation s socially beneficial objective involves promoting security and health both locally and nationally by helping to fund various causes. This shall occur in accordance with the foundation s basic values, which are Prevention Development Generate activities - Development of society. The funds that are distributed by the foundation shall mainly go to activities and projects that improve and safeguard the everyday lives of the general public or of selected target groups. We are looking for projects that will help promote change and for the dedicated souls who will see these projects through to completion. It is important that these projects be based on a good idea or a good proposal that will benefit and bring happiness to many people over a period of time. Importance is also attached to innovation and implementation capabilities. From its establishment in October 2007 up to year-end 2010, the Gjensidige Foundation has awarded a total of nok 533 million to 2,324 projects to promote security and health. Examples of national projects that have received considerable support are the learning to swim campaign in cooperation with the Norwegian Swimming Federation, the project En helt vanlig jul (A typical Christmas) with the Church City Mission, Active against Cancer, unicef s You can be the one project, Young Enterprise and Mot. The Gjensidige Foundation s representatives from the owner committees in each region recommend relevant local applications for support. The Board of Directors makes the final decision as to which projects will be approved. perspective

42governance

gjensidige annual report 2010 43 Management and control Risk management is an integral part of Gjensidige s day-to-day operations. Strong, comprehensive risk management is an important strategic tool for increasing value creation, and it enables the Group to handle uncertainty, threats and negative outcomes and to utilise the Group s risk capacity in an optimal manner. Risk management and risk factors are described more thoroughly in the directors report and in note 3. Centralised risk management functions independent of business operations have been established in the form of Compliance and Risk and capital management. The internal audit function provides a further independent level of control and reports directly to the Board of Directors. These functions are organised according to the principle of three lines of defence. The strategic plan and the more detailed business plans are important premises for the scorecards. It is strongly emphasised that the indicators shall be balanced and cover financial, operational and organisational factors, including the individual s need for skills development. These indicators are included in internal reports to the Board of Directors and the management each month and provide a basis for decisions regarding measures and responsibilities related to an effective achievement of targets. This monthly reporting is based on a budget approved by the Board of Directors. perspective governance Business and risk management and follow-up Personal scorecards have been prepared for the Group s employees. These set out key performance indicators, targets and measures that affect the Group s earnings, value creation and risk situation. In addition to the scorecards, budgets, various financial and non-financial measurement criteria, authorisations and trend analyses are also used in the management of the Group. The assessments of risk are closely linked to the business follow-up so that the managers of the individual areas are clearly aware that they are responsible for achieving goals within an acceptable level of risk. The group Ceo holds regular performance review meetings with the managers who report to him, where the focus is on measures to ensure earnings and performance. A comprehensive overview of the risk and capital situation for the Group will be prepared quarterly with an assessment of the need for measures that will be reviewed by both the Board of Directors and the management. External reports are prepared quarterly in accordance with IFrs and regulations issued by Finanstilsynet (the Financial Supervisory Authority of Norway). These reports are approved by the Board of Directors. A dedicated Internet portal has been developed, where the Company s management information has been collected and made available. Return on equity is the Company s key profitability measure. Equity and return requirements have been assigned to various parts of the business. Any earnings over and above the Company s required rate of return are a measure of real value creation. BOARD OF DIRECTORS/AUDIT COMMITTEE Business management Group Management Group risk committee Actuary function Chief Risk Officer Compliance function Internal audit 1st LINE Perform risk management and internal control 2nd LINE Assess, monitor, give advice and recommendations, quality assurance, quantification, aggregation of risk 3rd LINE Audit the framework for risk management and internal control, report to the Board of Directors

44 gjensidige annual report 2010 Compliance Gjensidige shall comply with all laws and rules that apply to the business (compliance). The Board of Directors has established a group policy for compliance that describes the main principles of responsibility for compliance and the organisation of the compliance function. The compliance function is an independent function that identifies, assesses, gives advice on, monitors and reports the Group s compliance risk. Assessment of the compliance risk is included in the Group s annual processes for risk assessment. A compliance officer has been appointed in all business and support areas and in the subsidiaries. The Group Compliance Officer is responsible for the Group s overarching control and reporting of compliance risk and any violations of regulations to which the Group is subject. The compliance function shall help ensure: that the management and employees have or are furnished with sufficient insight into or understanding of the compliance risk that laws, rules and standards are complied with and that the management shall be informed without prompting about all relevant factors that have or can have a significant effect on the relevant area of operations that compliance shall be ensured, for example, by examining compliance with external and internal sets of rules. The manager of the function reports to the group Ceo and to the Board of Directors. The compliance function is also responsible for the Group s warning routine for possible fraudulent acts and irregularities and for the prevention and examination of such. The risk management function The Department for Risk and Capital Management is headed by the Chief Risk Officer (Cro) and is responsible for monitoring the total risk situation and the framework for risk management, including internal control and the measurement and aggregation of risk. The Cro s responsibilities include ensuring an adequate risk management and internal control system, optimising capitalisation and capital use, ensuring that the asset allocation meets the Group s specified requirements, having an overview of the total risk situation in the Group and providing information about any factors that the Group s risk management committee ought to be aware of. In 2008, Gjensidige established a risk management committee that focuses on the overall risk situation for the Group. This committee is chaired by the group Ceo and acts as an advisory and explanatory body with regard to the management of essential risk factors in the Group. The Cro is responsible for seeing that the risk and capital situation and the need for measures are sufficiently clarified and brought to the attention of the risk management committee. This committee is also the supervisory steering committee for the Group s Solvency ii project. For more information about risk and capital management, cf. note 3. Internal auditing The Group has its own internal auditing function that covers all of the Group s companies. Group Auditing is an independent, objective supervisory function. On behalf of the Board of Directors and senior management, it reviews and assesses whether adequate, effective and appropriate management and controls have been established and implemented in the Group. The function was set up and functions in accordance with international standards and the requirements laid down in the Regulations concerning Risk Management and Internal Control. The Group Auditing Manager reports and submits reports to the Board of Directors on risk management and internal controls. The audit reports are also presented to the control committee and the external auditor. The Board of Directors approves Group Auditing s resources and annual plans. The Group Auditing Manager is hired and dismissed by the Board of Directors.

gjensidige annual report 2010 45 SOLVENCY ii Under the direction of the EU, the Solvency II regulations were established, and these regulations will result in a new standard for the calculation of capital requirements, requirements for risk management and the reporting of the risk and capital situation in European insurance companies. Solvency ii will help improve the measurement of risk and capital requirements for insurance companies, and it will strengthen risk management in general. Therefore, Gjensidige welcomes the new regulations, which are expected to enter into force on 1 January 2013, and the Company thinks this will give companies a greater incentive to measure and manage all risks in a consistent manner. This kind of discipline is good for long-term profitability and economic growth in the insurance markets. The development of Solvency ii is being closely followed up, and active efforts are being made to prepare for the upcoming regulations in a separate project that reports directly to the Group Ceo. Gjensidige has participated in all of the quantitative impact studies that have been performed, most recently in 2010 (called Qis 5). These have primarily focused on the impacts on capital, and as far as Gjensidige is concerned, Qis 5 shows that the Group will also be very well-capitalised under the new regulations, with an excess capital under the new requirements at least as high as under the current regulations. The greater extent of market-based valuation of assets and liabilities under the new regulations will also entail that the excess capital measured against the capital requirements will fluctuate more from one period to another in the future. Since the drivers for the capital requirement are significantly different, that may also result in the Group making changes in its adaptation of assets, of product pricing and product composition and of the Group s internal legal structure. There is considerable focus on this in the ongoing work in the Group s Solvency ii project. Although the external attention with regard to Solvency ii has mainly been focused on the changes in the capital requirement, both the authorities and Gjensidige think that this is an Enterprise Risk Management (erm) project. Therefore, in addition to the potential impacts on business mentioned above, the most important focus areas in the Group s efforts to adapt to Solvency ii are: Meeting the requirements for gaining approval for using the Company s own capital adequacy assessment (internal model) as a basis for the statutory capital requirements as well. ensuring an efficient processing of data for the internal model, reporting and risk management. improving general group routines for risk management. Meeting the extensive new reporting requirements specified in Solvency ii in an efficient way The Group established Solvency ii as a separate project area in 2009 on the strength of a gap analysis conducted in the previous year, and since then it has worked systematically to close the gap that was apparent relative to the coming requirements. Under Solvency ii, the Group can apply to use an internal model to calculate the regulatory capital requirement. This entails that the capital requirement reflects, to the greatest extent possible, the Group s own quantitative assessment of the risk and the impact of the risk-reduction measures that are in place, e.g. reinsurance. Since 2004, Gjensidige has developed a so-called Asset Liability Management (alm) model that is used in its internal capital management. This model will be further developed in both scope and areas of use, and Gjensidige will apply to get it approved as an internal model. In addition to a more correct assessment of the capital requirement, this is thought to give improved risk management by more consistently taking the impacts on risk and capital into consideration in strategic and operational decisions. The internal model, better risk management and the enhanced requirements for external reporting that come under Solvency ii make great demands on the scope, quality and accessibility of data. Thus, an important part of the project is data processing and its documentation. Few industries are as data-intensive as insurance, and these efforts also have positive impacts on other areas in the Group. Many of the requirements for efficient group-wide risk management that are specified in the Solvency ii regulations have already been met at Gjensidige. Functions and governing documents are in place and efforts are being made to get as many common systems and routines as possible in the individual companies in the Group. The overriding principle that is followed is to ensure that risk and business management are as closely integrated as possible. This gives quicker identification of risks compared with not achieving goals and initiating corrective measures. In 2010, Gjensidige has also begun the work of adapting to new reporting requirements. In Solvency ii, there are both new requirements for the information that has to be reported to the market in general ( Solvency and Financial Condition Report ) and to the supervisory authorities ( Reporting to Supervisors ). The objective of the enhanced reporting requirements is to give the users of accounting information a better picture of the risk that is inherent in the activities in light of the available capital, which shall help the market exercise discipline over the companies risk-taking. The information requirements shall be equivalent within the eu so that it is easier to compare companies from different countries. The challenge for the companies is that the preliminary specifications from the supervisory authorities are very extensive, and there will have to be an evaluation of whether such an extensive amount of information is reasonable in light of the objective of the new regulations. perspective governance

46 gjensidige annual report 2010 The Gjensidige share Gjensidige Forsikring ASA was listed on Oslo Børs (the Oslo Stock Exchange) on 10 December 2010. At year-end 2010, the Company had nearly 50,000 shareholders. The Gjensidige Foundation is the largest shareholder with a stake of just over 60 per cent. Shareholder and ir policy Gjensidige shall maintain an open dialogue with all interested parties. Shareholders, potential investors and other players in the financial market shall have access to relevant and supplementary information regarding group strategies and financial targets, economic development and financial standing. All financial and other investor information will be disclosed simultaneously in Norwegian and English. Information on the Group s website, www.gjensidige. com, is also available in Norwegian and English. Financial and non-financial targets have been set, which guide the Group s operations. These targets are disclosed at least once a year in connection with the Annual Report and otherwise as soon as possible if revised or new targets are approved by the Board of Directors. Gjensidige does not disclose specific guiding for the Group s future financial earnings. Dividends and dividend policy The Board of Directors has approved a dividend policy that will form the basis for the dividend proposals that are submitted to the general meeting. Gjensidige shall have a dividend policy that ensures competitive dividends relative to comparable investments. In determining the size of the annual dividend, consideration shall be given to the Group s capital requirements, including capital adequacy requirements, together with the Group s objectives and strategic plans. Unless the capital requirements suggest otherwise, the Board of Directors goal is that between 50 and 80 per cent of the profit for the year after tax will be distributed as dividends. In addition to paying a cash dividend, Gjensidige will also evaluate the buyback of shares as a means of increasing the total shareholder return. For the 2010 financial year, the Board of Directors of Gjensidige Forsikring asa has recommended that dividends equivalent to 80 per cent of the profit after tax be distributed. This yields dividends totalling nok 2,350 million, which comes to nok 4.70 per share. The dividend for the 2010 financial year will be approved by the general meeting on 27 April 2011 and paid based on shareholdings on the date of the general meeting. The dividend is expected to be paid about eight business days after the date of the general meeting. Ownership In June 2010, Gjensidige Forsikring was converted from a mutually owned company to a public limited company (asa). At the time of conversion, the Gjensidige Foundation owned all of the shares of Gjensidige Forsikring and conducted a sell-down in connection with the listing of the shares of Gjensidige Forsikring on Oslo Børs in December. The Gjensidige Foundation has an ownership policy that focuses on high value creation over a period of time. The Gjensidige Foundation expects an annual dividend that is competitive relative to equivalent businesses, and it wants to have a leading ownership and help ensure stable ownership and predictability. The Foundation can accept a reduced ownership ratio in the event of acquisitions or capital expansions that are in harmony with Gjensidige s overall strategy. In addition, the Foundation expects the Company to be managed in accordance with recognised principles for good corporate governance. The Gjensidige Foundation administers ownership on behalf of the Norwegian general insurance customers, which entails, for example, that the dividend from Gjensidige Forsikring is redistributed through the Gjensidige Foundation to the Norwegian general insurance customers. As per 31 December 2010, Gjensidige had just under 50,000 shareholders 20 LArgest shareholders as at 31 december 2010 1 Nr Shareholder Number of shares Stake 1 Gjensidigestiftelsen 308,685,000 61.74 2 Skagenfondene 22,087,000 4.42 3 Folketrygdfondet 13,725,000 2.75 4 DWS Investments 9,303,368 1.86 5 Goldman Sachs clearing account 8,138,964 1.63 6 Thornburg Investment Management 7,947,240 1.59 7 Greenlight Capital 7,000,000 1.40 8 Eton Park Capital Management 6,000,000 1.20 9 Lansdowne Partners 5,000,000 1.00 10 Credit Suisse Prime Brokerage (Custody) 4,855,813 0.97 11 Citadel 4,525,813 0.91 12 Odin Fund Management 4,000,000 0.80 13 Klp 2,697,013 0.54 14 Rasmussengruppen as 2,540,000 0.51 15 DnB nor as Marketmaker 2,448,337 0.49 16 Alfred Berg 2,289,000 0.46 17 DnB nor Asset Management 2,014,500 0.40 18 Vital Forsikring asa 1,998,200 0.40 19 Barclays Capital as principal 1,967,336 0.39 20 People s Bank of China 1,830,735 0.37 Total 20 largest 419,053,319 91.75 Total number of shares 500,000,000 100.00 1) the list of shareholders is based on an analysis of the register of shareholders in the Norwegian Central Securities Depository (Vps) performed by rd:ir. This analysis provides a survey of the shareholders who are behind the various nominee accounts. There is no guarantee that the list is complete. A list of the 20 largest shareholders as specified in the register of shareholders in Vps is presented in note 27 on page 145.

gjensidige annual report 2010 47 Registrar Gjensidige s registrar is DnB nor Bank asa, Verdipapir.ervice, 0021 Oslo, Norway. Tel.: +47 22 48 35 90, fax: +47 22 48 11 71. Share capital The share capital in the Company is nok 1,000,000,000 divided among 500,000,000 shares with a nominal value of nok 2 per share. operations. Use of this authorisation requires that a binding agreement has been entered into with the Gjensidige Foundation, which ensures a reduction of shares without changing the percentage of the Gjensidige Foundation s ownership. The authorisation has not been used. The Board of Directors will propose that the authorisations be extended in the same scope, for the same purpose and on the same terms. perspective governance At year-end, Gjensidige Forsikring owned 26,983 of its own shares, and the number of outstanding shares was 499,973,017. Shareholdes, geographical Distribution 1 Norway: 59.5% Great Britain: 20.1% Europe, other: 6.4% usa: 13.9% Other: 0.0% 1 The distribution is based on the shareholders address in the Vps owner registry as at 31 December 2010, and comprises only the shares which at that date had been sold by the Gjensidige Foundation, representing 38,3% of shares issued. Authorisation According to the resolution of the general meeting on 24 August 2010, the Company s Board of Directors is authorised to purchase the Company s own shares up to the next ordinary general meeting, but no later than 30 June 2011. The minimum and maximum amounts that may be paid per share are nok 20 and nok 100 respectively. Two authorisations have been given. First, an authorisation has been given to acquire the Company s own shares with an aggregate nominal value of up to nok 3,000,000 with the aim of transferring shares to employees in the Gjensidige Group as part of the Group s share ownership programme approved by the Board. This authorisation was employed in connection with an equity offering to the Company s employees in Denmark and Sweden. Second, authorisation has been given to acquire shares at a nominal value of up to nok 50,000,000. This authorisation may be used for no other purpose than cancellation by means of a capital reduction, cf. Section 12-1 of the Act relating to Norwegian Public Limited Companies, or prior to this date as compensation in the purchase of General meeting The general meeting is the supreme body in Gjensidige. The structure of the bodies under the general meeting mirrors the structure of financial institutions in Norway with a supervisory board, a Board of Directors with working committees, a control committee and a nomination committee. The next ordinary general meeting will be held at Felix Conference Centre, Bryggetorget 3, Oslo, Norway on 27 April 2011, at 15:00, Cet. The general meeting is open and accessible to all shareholders. Registration to the general meeting is done electronically at www.gjensidige.com. The deadline for registration is 26 April 2011, at12:00 Cet. The agenda and appendices will be made available on the Company s website. Shareholders may have the documents for the general meeting mailed to them free-of-charge if they so request. These documents may be ordered from www.gjensidige.com Financial calendar 27 April general Meeting 12 May Q1 results 2011 11 August Q2 results 2011 10 November Q3 results 2011 1 December Capital Market Day Analysts A number of brokerages initiated coverage of Gjensidige Forsikring in connection with the stock exchange introduction in December 2010. A list of the brokerages that cover Gjensidige may be found at www.gjensidige.com.

48 gjensidige annual report 2010 corporate governance The Board of Directors account is based on the Norwegian Code of Practice for Corporate Governance of 21 October 2010. As the account reveals, Gjensidige has arranged its operations in accordance with the code on all points. According to the Board of Directors, corporate governance shall be based on: optimising the Company s assets in a long-term perspective equal treatment equal and secure access to reliable, relevant and up-to-date information about the Company s business an independent Board of Directors that takes the overall interests of the shareholders into consideration safeguarding aligned interests between the owners, the Board of Directors and the management The Gjensidige Foundation is the Company s majority shareholder and has formulated a value-creating ownership policy with an objective of a normal market return stipulated in the Articles of Association. The majority owner represents a historically long continuity of ownership, where the Norwegian-based customers of Gjensidige Forsikring asa have a controlling interest. The customers also receive customer dividends based on the size of the customer relationship based on the dividends that the Gjensidige Foundation receives as a shareholder. Core values and social responsibility Gjensidige s core values lie in its core business operations - give the customers security by safeguarding life, health and assets by relieving the customers of risk. One of the premises for our operations is that they are based on ethics and social responsibility. With this point of departure, the Board of Directors has established guidelines for ethics and social responsibility. Gjensidige s commitment to this premise shall be further developed on the basis of the expertise that has been developed by conducting our core business operations. In this way, the society reaps the greatest possible benefit from the group s contributions to society. Especially important areas are traffic and fire, where the Company s expertise in loss prevention can help save lives and assets. Other important areas are awareness campaigns that counteract fraud and other crimes and efforts that promote physical and mental health in the population. Therefore, the socially responsible extra efforts shall be concentrated on loss prevention in the broadest sense. The internal control and the systems encompass the Company s core values and guidelines for ethics and social responsibility. The efforts to promote social responsibility are described in greater detail on pages 38 to 40 of the Annual Report. The guidelines are available at www. gjensidige.com. Quantitative goals have been specified for socially responsible operations with regard to owners, customers, employees and the environment. Objectives and the achievement of objectives are presented in the table on page 41 of the Annual Report. The working environment, equal opportunity and integration are described in greater detail in the Report of the Board of Directors. A separate information bulletin with routines for how whistle blowing is to be practiced has been established and is included as a part of the ethical guidelines. A separate ethical suggestions box has been established, where relevant matters can be reported. The Company s financial investments shall comply with international rules for socially responsible investment (sri). Companies that do not meet the requirements in connection with human rights, employee rights, the environment, corruption or weapons production shall be excluded. OPERATions In accordance with the Articles of Association, Gjensidige can conduct direct and indirect general and life insurance operations, take on pure risk insurance of one year s duration at most in life insurance, own companies that conduct general insurance, life insurance, banking, financing and securities operations, take on risk insurance and reinsurance in life insurance to the extent permitted by law and other business that is naturally related to these activities. Objectives and main strategies At least once a year, the Board of Directors considers the Company s strategy and determines it with relevant short and long term aims. Current objectives and main strategies are described in greater detail in the Annual Report on pages 12-13 Purpose The Company s purpose is established in the Articles of Association, which are available in their entirety on the Group s web site, www.gjensidige.com. The purpose is to meet the customers needs for security by offering competitive insurance products and other services that are naturally associated with those products. EQuiTY and DiviDenDS Equity The Gjensidige Group s equity amounted to nok 23,137.8 billion (IFrs) at year-end 2010. The Group s capital requirements must be determined on the basis of various perspectives. The Board attaches considerable importance to the following perspectives: - legal requirements from the authorities (capital adequacy and solvency margin) - the rating companies requirements for subordinated loan capital in order to maintain the targeted rating - requirements for subordinated loan capital based on internal risk models - the Group s capital requirements in order to achieve objectives and strategies

gjensidige annual report 2010 49 Owners : Insurance customers in Norway General meeting Customer dividend Shareholdes The Gjensidige Foundation (61.74 %) Other shareholders (38.26 %) Dividend The Control committeee GENERAL MEETING THE SUPERVISORY BOARD THE BOARD OF DIRECTORS The nomination committee Owner shares after ending the stabilisation period, in January 2010. The Group currently has excess capital, relative to statutory requirements, risk profile and the objective of gaining an A-rating from S&P It supports the approved dividend policy, gives freedom of action and, among other things, covers the uncertainty in connection with the impacts on capital of the new solvency regulations (Solvency ii) and the marketing opportunities that are triggered as a result of the stricter capital requirements. Therefore, the Board of Directors has no plans for an extraordinary dividend to the shareholders at present. distribution of capital to the Company s shareholders. The buyback of the Company s own shares will also be an important measure for achieving a continuous adjustment to an appropriate capital structure. The authorisation has not been utilised. When the Board of Directors proposes new authorisations at the annual general meeting, these shall be limited in the same way as the previous ones to specified objectives and apply for the time period up to the next ordinary general meeting. perspective governance Dividends The Board of Directors has approved a dividend policy that forms the basis for the dividend proposals that are submitted to the general meeting. Gjensidige shall have a competitive dividend policy relative to comparable investments. In determining the size of the annual dividend, consideration shall be given to the Group s capital requirements, including capital adequacy requirements, together with the Group s objectives and strategic plans. Unless the capital requirements suggest otherwise, the Board of Directors objective, given the current capitalisation of the Group, is that between 50 and 80 per cent of the profit for the year after tax will be distributed as dividends. In addition to paying a cash dividend, Gjensidige will also evaluate the buyback of shares as a means of increasing the total shareholder return. The Board of Directors recommendation for the distribution of dividends for the 2010 financial year is explained in greater detail in the Report of the Board of Directors. Authority granted to the Board of Directors Gjensidige s annual general meeting has given the Board of Directors the following authorisations: - authorisation to buy back up to 0.030 per cent of the issued shares for implementation of the employee share ownership programme. This authorisation is valid up to the next ordinary general meeting, but no later than 30 June 2011. The objective of this kind of measure will be to improve a good business culture and employee loyalty by making the employees partial owners of the Company. The authorisation was employed in connection with an equity offering to the Company s employees in Denmark and Sweden. - authorisation to buy back up to five per cent of the issued shares for subsequent deletion. The authorisation is valid up to the next ordinary general meeting, but no later than 30 June 2011. The grounds for this authorisation are to give the Board of Directors the opportunity to utilise the mechanisms that the Public Limited Companies Act allows for the EQual TreaTMenT The Company only has one class of shares, and all of the shares have the same rights in the Company. At the general meeting, each share carries one vote, unless otherwise specified by law or a government decision. When issuing new shares, the existing shareholders have pre-emptive rights. With the approval of at least 2/3 of the total number of votes represented at the general meeting, the general meeting may decide to set aside the preemptive rights. Any proposal concerning setting aside the pre-emptive rights must be explained. The Board of Directors is authorised to buy back the Company s own shares. Any buyback of shares must occur in a stock exchange or in some other way at the stock market price, normally after a preliminary notice in the form of a stock exchange notice. When non-immaterial agreements are entered into among the Company and shareholders, shareholders parent company, Board members or members of the management or parties closely related to them, the Board will obtain the assessment of an independent third party. The same applies to agreements with companies in the Group that have minority shareholders. This is pursuant to the rules of procedure that are accessible on www.gjensidige.com. Every Board member and member of the management shall immediately notify the Board in writing if he or she directly or indirectly has an interest in a transaction or agreement that has been entered into or is being considered to be entered into by the Company. This applies even if the Board member is deemed to be disqualified to consider the matter because of conflict of interest. These provisions are laid down in the rules of procedure. FREE negotiability The shares in the Company are freely negotiable in accordance with the Articles of Association. Gjensidige is a Norwegian financial institution. Norwegian framework legislation has general licensing rules that apply to all Norwegian financial institutions in the event of large acquisitions of shares (ten per cent or more).

50 gjensidige annual report 2010 General MeeTinG The general meeting is the supreme body in Gjensidige. The general meeting is open and accessible to all shareholders. An ordinary general meeting shall be held each year before the end of May. The general meeting is arranged in keeping with the Code of Practice: - It is stipulated in the Articles of Association that at least three weeks notice shall be given for the meetings. Notice of meetings and agenda papers will be made available on the Group s website www.gjensidige.com. Shareholders may nevertheless be sent case documents free of charge on request. The minutes will be publicised at www.gjensidige.com as soon as they are available. - the agenda papers shall be comprehensive enough to provide the basis for making a decision on the business that is discussed. - shareholders wishing to attend the general meeting must notify the Company in writing no later than five days prior to the meeting. The deadline for registration is based on practical considerations for the arrangement of the general meeting. - in connection with the general meeting s election, arrangements will be made so that candidates can be voted for one at a time. - The managing director and the chairmen of the Board of Directors, the supervisory board, the nomination committee and the auditor are obligated to be present unless it is clearly unnecessary or they have a valid reason for absence. - pursuant to the Articles of Association, the general meeting shall be chaired by the chair of the supervisory board, or alternatively by the deputy chair, and in the absence of both by the Chairman of the Board or another person designated by the Board of Directors. Shareholders may be represented by proxy. The notice will include further information about the procedure for being represented by proxy, including the authorisation form. In addition, a person will be appointed who may vote by proxy on behalf of shareholders. Pursuant to the Articles of Association, the Board of Directors may decide that shareholders shall be able to attend the general meeting with the aid of electronic means, including exercising their right as shareholders by electronic means. This kind of decision requires preparation and so such an arrangement cannot be introduced in connection with the upcoming annual general meeting. NOMinaTion committee Gjensidige has stipulated in the Articles of Association that the Company shall have a nomination committee consisting of four to six members elected by the general meeting. The chair of the supervisory board is a permanent member if he or she has not already been elected by the general meeting. The chair and members of the nomination committee are elected by the general meeting once a year. At present, the nomination committee of Gjensidige is composed of five members, including the chair of the supervisory board. All of the members are independent of the Board of Directors and the other executive management. Four of the members are also members of the supervisory board, including the chair of the supervisory board. Information concerning the nomination committee s members is available on the Internet at www.gjensidige.com. Two representatives elected by and from among the employee members of the supervisory board shall take part in the nomination committee s work on preparations for the election of Chairman of the Board and the chair and deputy chair of the supervisory board. The nomination committee shall propose candidates with the exception of the employees representatives for: - the supervisory board - the general meeting s proposals concerning the election of a chair and deputy chair, - the supervisory board s election of a chair and deputy chair - the Board of Directors, including the Chairman of the Board - the control committee, including the committee s chair, - the nomination committee and the committee s chair - an auditor. Recommendations with grounds and relevant personal information are enclosed with the notice of the election meeting in which the nomination is being made. The nomination committee shall recommend all remuneration that shall be determined by the general meeting or the supervisory board, including remuneration to the members of the nomination committee, which is determined by the general meeting, and it shall make a recommendation as to whether the proposed remuneration to the auditor shall be approved. Rules of procedure have been drawn up for the nomination committee s work, and these have been approved by the general meeting. The rules of procedure are available at www.gjensidige.com. The Board of Directors will propose a supplement to the nomination committee s rules of procedure that will be approved by the general meeting. It is proposed that a deadline be set for submitting proposals to the nomination committee. This shall ensure that all of the shareholders have the possibility of submitting proposals that can be considered by the nomination committee prior to an election.

gjensidige annual report 2010 51 SUPERVISORY board and board of DirecTors, composition and independence The supervisory board s composition The supervisory board of Gjensidige is composed of 21 members or a higher number divisible by three. The employees representatives are elected for two-year terms; the remaining representatives are elected for one-year terms. The chair of the supervisory board and the deputy chair are elected by the supervisory board for one-year terms. - the members of the Board of Directors should be independent of the Company s day-to-day management. In the current Board, 43 per cent of the shareholder-elected members are women. A more detailed presentation of the Board members may be found on pages 60 to 70 in the Annual Report and on the Company s website, www. gjensidige.com. The Annual Report also specifies the individual Board member s attendance at Board meetings in 2010. perspective governance At present, the supervisory board is composed of 21 members, 14 of whom were elected by the shareholders and seven of whom are elected by the employees. The supervisory board s members are listed at www.gjensidige.com. The supervisory board s independence The supervisory board has a diversified composition, and the majority of its members are independent of any special interests (direct, indirect or through employment) in the Company. Two of the shareholder-elected representatives are independent of the Gjensidige Foundation. Pursuant to Section 2d-3, paragraph four of the Financial Institutions Act, no more than one third of the members of the supervisory board or the Board of Directors of Gjensidige may be elected representatives of the Gjensidige Foundation. The Ministry of Finance has granted dispensation from this provision so that more than one third of the members of the board may be elected representatives of the foundation until the next ordinary general meeting, i.e. the ordinary general meeting in the spring of 2011. After that, the Gjensidige Foundation will be represented by up to one third of the members of the supervisory board. The composition of the Board of Directors The Board of Directors of Gjensidige shall be composed of ten members, three of whom are to be elected by the employees. In financial institutions, the law requires that the Board of Directors be elected by the supervisory board. The shareholder-elected Board members are to be elected for one-year terms. The Chairman of the Board will be directly elected by the supervisory board. The employee-elected Board members are to be elected for two-year terms, but in such a way that at least one member is up for election each year. The Board of Directors of Gjensidige shall have a broad composition. In the nomination committee s rules of procedure, the general meeting provides the following guidelines for the nomination committee s work: - the nomination committee shall emphasise that all of the proposed candidates should have the necessary experience, qualifications and capacity to satisfactorily discharge the offices in question. - emphasis shall be given to safeguarding the overall interests of the shareholders. The Board of Directors independence No one employed in the day-to-day management is a member of the Board of Directors. All of the shareholder-elected Board members are independent of the executive management. Three of the shareholder-elected Board members represent the Gjensidige Foundation. The remaining Board members are independent of the principle shareholder. All of the Board members are independent of important business associates. Board members shareholdings 9 of the Board s members own shares in the Company; cf. the list on page 137 of the Annual Report. The Board members comply with the general rules for primary insiders, but have voluntarily accepted and informed their closely related parties that trading in Gjensidige s shares or derivative instruments will only be conducted within a reasonable time frame after the quarterly report has been submitted so that trading can be conducted with equal information about the Company and the Company s financial position. The WorK of The board The work of the Board of Directors follows a fixed annual plan and is administered in accordance with established rules of procedure. The rules of procedure are available at www.gjensidige.com. Furthermore, the Board of Directors has specified rules of procedure for the managing director that regulate the internal division of responsibility and tasks. The Board of Directors holds physical meetings regularly and holds nine regular meetings each year. Additional meetings may be held depending of the matters to be considered and the situation. These meetings may be held as telephone meetings. In 2010, a total of 11 Board meetings were held prior to the conversion to a public limited company and 8 afterward. One of the meetings was a two-day strategy meeting. In matters in which the Chairman of the Board is or has been actively involved, some other Board member shall chair the Board s discussion of the matter. The Board of Directors has established two working committees a compensation committee and an audit committee. The committees tasks and the

52 gjensidige annual report 2010 requirements for their composition are regulated in greater detail in the rules of procedure. All of the members of the two committees are independent of the business and its daily management. A list of the members of the two committees may be found at www.gjensidige.com. In connection with the demutualisation and conversion of the Company, the Ministry of Finance has set a licence condition that Board members who are affiliated with the Gjensidige Foundation (three members at present) may not be members of the audit committee. In cooperation with the authorities, a transitional arrangement has been established that will last up to 30 June 2011 at the latest. The Board of Directors conducts an annual self-evaluation. RISK ManaGEMenT and internal control The Board of Directors focuses on risk management and internal control, and this is an integral part of the Board of Directors planned work. The Board of Directors has approved Corporate policy for risk management and internal control. Among other things, this document describes main principles for risk management and internal control, and it includes a clear description of the division of responsibility. The document is available at www.gjensidige.com. The Board of Directors conducts an annual review of the Group s most important areas of risk and the internal control. Centralised risk management functions have been established that are independent of the business operations: Compliance and Risk and Capital Management. In addition, the internal audit function provides a further independent level of control and reports directly to the Board of Directors. - the Compliance function is an independent function that identifies, assesses, gives advice on, monitors and reports the Group s compliance risk. Assessment of the compliance risk is included in the Group s annual processes for risk assessment. - the Department for Risk and Capital Management is responsible for monitoring the total risk situation and the framework for risk management, including internal control and the measurement and aggregation of risk. - group Auditing is an independent, objective supervisory function. On behalf of the Board of Directors and senior management, it reviews and assesses whether adequate, effective and appropriate management and controls have been established and implemented in the Group. The Group s risk management functions are organised according to the principle of three lines of defence and are described in greater detail in a separate chapter of the Annual Report concerning management and control on pages 43-45 and in note 3 of the Annual Accounts. Financial institutions are required to have their own elected control committee. The control committee is independent of the Board of Directors and administration and meets regularly. It ensures that the Company will comply with the current laws, regulations and other rules laid down by the authorities, the +Company s Articles of Association and resolutions by decision-making bodies. The committee has full supervision of the operations and is composed of three members. A list of the control committee s members and the control committee s rules of procedure is available at www.gjensidige.com. The internal control and the systems also encompass the Company s core values and guidelines for ethics and social responsibility. REMuneraTion of The board of DirecTors The nomination committee recommends the remuneration to the Board of Directors, which is determined by the supervisory board. This remuneration is not performancerelated, and none of the Board members have share options issued by the Company. No one on the Board of Directors performs any special tasks for the Company, but in 2010 certain Board members, together with other elected representatives in Gjensidige, participated in a separate task force that worked on the conversion to a public limited company. Remuneration is provided for this in accordance with the principles and rates determined by the supervisory board. The individual Board member s remuneration is presented on page 137of the Annual Report. REMuneraTion of The EXecuTive ManaGEMenT The Group has established a remuneration scheme that applies to all employees. Remuneration shall be competitive, but not the highest salaries in the industry. It is expected that our employees view what the Group offers in terms of remuneration and benefits as a total package. The following principles apply: The Group s remuneration schemes shall be open and performance-based so that they are perceived as fair and predictable to the greatest possible extent. There should be accordance between agreed performance and the remuneration that is given. Remuneration and career development shall be tied to achieving the Group s expressed strategic and financial objectives and core values, where both quantitative and qualitative objectives are included in the assessment. The measurement criteria shall promote long-term economic growth and take the actual capital costs into consideration as much as possible. The remuneration scheme shall help promote and provide incentives for good risk management, counteract excessive risk-taking and avoid conflicts of inter-

gjensidige annual report 2010 53 est. A regular basic salary shall be the main element of the total remuneration, which also consists of a bonus, a pension and benefits in kind. There is a ceiling on all bonuses. The following decision-making process has been established: The Board of Directors has established a compensation committee that is composed of three members, the Chairman of the Board and two Board members. The committee shall prepare items of business for the Board of Directors and have the main responsibility for: drafting proposals for and monitoring compliance with the Group s guidelines and limits for remuneration annually assessing and proposing the group CEO s remuneration annually drawing up a proposal for the group CEO s personal scorecard being an advisor to the group CEO concerning the annual assessment of the remuneration to the rest of the executive management drafting proposals for principles and a statement on determining pay and other remuneration to executive management, employees and elected representatives with job tasks of crucial importance to the enterprise s risk exposure as well as other employees and elected representatives with supervisory tasks assess other important personnel-related matters concerning executive management. The Board s guidelines for determination of the remuneration of the executive management are presented in note [19] in the Annual Report. These guidelines are submitted to the annual general meeting as a separate item of business. INFORMATION AND COMMunicaTion Gjensidige shall maintain an open dialogue with all interested parties. Shareholders, potential investors and other players in the financial market shall have access to relevant and supplementary information regarding group strategies and financial targets, economic growth and financial standing. The Board of Directors has approved guidelines for reporting financial and other information. The guidelines are available at www.gjensidige.com. Gjensidige has compiled all relevant owner information about the Group at www.gjensidige.com. This is the most important tool for providing equivalent, up-to-date, relevant information to everyone. A financial calendar with dates for publication of financial information and notification of general meetings and meetings of the supervisory board is also published on this web page. The Company has a separate Investor Relations (IR) function and a communication department, which have a prominent position in the central management and an objective of ensuring that the information efforts are always in accordance with the best practices. Guidelines have been specified for contact with owners outside of the general meeting. The guidelines are available at www.gjensidige.com. CORPORATE TAKeovers Guidelines have been approved for corporate takeovers. These guidelines ensure that all of the shareholders interests are safeguarded and help promote equal treatment of the shareholders. The guidelines are in accordance with the Norwegian Code of Practice for Corporate Governance. The Board of Directors will obtain an independent valuation and draft a recommendation as to whether or not the shareholders should accept the offer. AUDITOR An external auditor is elected by the supervisory board in accordance with a recommendation from the Company s nomination committee. A number of regular meetings between the external auditor and company bodies are held during the year - The auditor annually presents the main features of the audit plan to the audit committee. In addition, the auditor s assessment of the internal control related to financial reporting is considered by the audit committee. - The auditor attends Board meetings when the annual accounts are considered. - At least one meeting is held annually between the Board of Directors and the auditor, where the managing director and other executive management are not present. - The elected auditor shall attend meetings of the Company s control committee at least twice a year. According to current practice, the external auditor attends all of the meetings of the control committee. The Board of Directors has specified policy and guidelines for the relationship to the elected auditor. At least once every five years, tenders will normally be solicited from several accounting firms to perform the statutory auditing of the Company. The Company s guidelines set constraints on the purchase of supplementary services from the elected auditor. Furthermore, the audit committee shall monitor the auditor s independence, including the services other than auditing that are provided by the auditor. The breakdown between auditor s fees and consulting fees for 2010 is presented in note 18 in the Annual Report. The supervisory board approves the auditor s remuneration. In the meeting, information is provided about the breakdown of the auditor s remuneration into auditing and other services. perspective governance

54 gjensidige annual report 2010 group MAnagement Gjensidige s group management of nine persons has an average of 11 years of experience in the industry. Five of these senior managers have been in the group management for the last eight years. In this period, Gjensidige has evolved into a financial group with operations in Norway, Sweden, Denmark and the Baltic states. 1 2 3 4 5 1 helge L. Baastad Group ceo Baastad was appointed Chief Executive Officer ( Ceo ) of the Group in 2003. Mr. Baastad joined Gjensidige in 1998 as Executive Director and has held various executive positions within the Group, including Executive Vice President of Gjensidige. He has been a member of the group management since 2001. Before joining Gjensidige, he held various executive positions at Jordan as from 1987 to 1998 and at Denofa and Lilleborg Fabrikker, a unit of Orkla asa, from 1984 to 1987. Baastad is member of several boards, including Finance Norway and Jordan as. In addition he is Chairman of the Board of Gjensidige Bank Holding as, Gjensidige Pensjon og Sparing Holding as and Gjensidige Pensjonsforsikring as. Mr. Baastad is a graduate of the Norwegian School of Economics and Business Administration (NHH). 2 Tor M. Lønnum Deputy ceo and Group cfo Lønnum was appointed Deputy Ceo and Group Chief Financial Officer ( CFO ) in 2004. Mr. Lønnum joined Gjensidige in 1999 and has held various executive positions within the Group, including Director of Strategy and Group Development. Mr. Lønnum has been a member of the group management since 2001. Before joining Gjensidige, he held various executive positions, including CFO of Skipper Electronics as from 1991 to 1993, and he was a manager at KPMG from 1996 to 1999. He is member of the Board of Directors of Sparebank 1 sr-bank and has previously been a member of the Board of Lindorff Holding AB. Mr. Lønnum is a state authorised public accountant from the Norwegian School of Economics and Business Administration (NHH), and holds a degree in accounting from the Norwegian School of Management (BI) as well as an executive MBA from the University of Bristol and École Nationale des Ponts et Chaussées. 3 hege yli melhus Executive Vice president, Private Melhus was appointed Executive Vice President Private in January 2011. She joined Gjensidige from her position as Ceo of Agito Nordic as. Melhus has previously served as Group Executive Vice President Markets (Electricity, Private and Corporate) in Hafslund asa. Her work experience also includes the position as Associate in Kistefos Venture Capital AS and Research Associate at insead, France. Melhus is a Board member of Skagerak Venture Capital and has previously been a member of the Board of Representatives of Nordea Bank Norge asa. She holds a Maîtrise des Sciences de Gestion (eq. MA in Business Economics) from Université Paris IX Dauphine, France. 4 bjørn Asp Executive Vice president, Pension and savings Asp was appointed Executive Vice President for Pension and savings in 2005. Mr. Asp joined Gjensidige in 1982 and has held various executive positions within the Group. He has been a member of the group management since 2001. Mr. Asp was previously a member of the Board of Directors of Viking Venture, Steinkjer Næringsselskap and Marin Vekst. He holds a degree in economics from Handelsakademiet. 5 Trond DelbeKK Executive Vice president, Commercial Delbekk was appointed Executive Vice President, Commercial in 2010. Mr. Delbekk joined Gjensidige in 1997 and has held various executive positions within the Group, latest Execitive

gjensidige annual report 2010 55 perspective governance 6 7 8 9 Vice President Private. Mr. Delbekk has been a member of the group management since 2001. He has held senior positions in banking at Nordea and Sparebanken NOR, and is currently a board member of Integrasjonspartner AS, Solid Gruppen AS, Solid Prosjekt AS and Solid Entreprenør. Mr. Delbekk holds a Bachelor of Economics as well as a Master s degree in Management from the Norwegian School of Management (BI ) 6 lise westly Executive Vice president, Health care services Westly was appointed Executive Vice President, Health Care Services in 2010. She joined Gjensidige in 2010 from her previous position as Ceo of Capio/Volvat Medical Center. Before joining Gjensidige, Ms. Westly held various executive positions, including managing director of Capio Norge Holding as and Volvat Medisinske Senter as, as well as Chair of the Board of Mensendieck Klin. Fysioterapi as, Capio Anoreksi Senter Fredrikstad as and Klinikk Bunæs as. She is a trained pharmacist and also has an MBA from Henley Business School, University of Reading. 7 MarTin Danielsen Executive Vice president, Product and Price Danielsen was appointed Executive Vice president, Product and Price in 2009. He joined Gjensidige in 2006 and has been a member of the group management since 2009. Mr. Danielsen has held several positions within the Group, including deputy Ceo of Gjensidige Pensjon og Sparing. Before joining Gjensidige, Mr. Danielsen held positions in companies such as McKinsey, BearingPoint, Storebrand and If. Mr. Danielsen holds a Bachelor of Science in Business Administration from the University of Bath, and a Norwegian law degree (cand.jur.) from the University of Oslo. 8 Kim Rud-Petersen Executive Vice president, International General Insurance Rud-Petersen was appointed Executive Vice President, International General Insurance in 2010. He came from a position as head of the Commercial in the Danish business. Mr. Rud-Petersen was appointed sales director of KommuneForsikring in 2005. Prior to this, he held positions in Codan and aon. Rud-Petersen is a member of the Board of Directors in Compass Human Resources Group A/S, deputy Chairman of the Board of Gjensidiges Arbejdsskadesforsikring A/S and chairman at the Board in Nykredit Forsikring A/S as well as Tennant Forsikring and Gjensidige Baltic. Rud- Petersen holds a Bachelor of Insurance as well as a MBA from ium Monaco. 9 Jørgen RinGDal Executive Vice president, Group Staff Ringdal was appointed Executive Vice President of Group Staff in 2006. He joined Gjensidige in 1996 and has been a member of the group management since then. He has held various executive positions within the Group, including Corporate President of Economics/Finance. Before joining Gjensidige, Mr. Ringdal held various executive positions, including assistant Chief Auditor, at Norges Bank (the Norwegian central bank) from 1989 to 1992, and was a manager at KPMG from 1992 to 1996. He is Chairman of the Board of Gjensidige Bank Boligkreditt as and Gjensidige Pensjonskasse and member of the Board of Gjensidige Bank Holding as. He is a state authorised public accountant and holds an MBA from the Norwegian School of Economics and Business Administration (NHH).

56 gjensidige annual report 2010 supervisory board, control committee and nomination committee Supervisory board nomination committee Control committee Bjørn Iversen, Chairman Kirsten Ingjerd Værdal, Deputy chairman Marthe Sondov Margrethe Ruud Skjeseth Lilly T. Stakkeland Inger Tone Ødegård Mette Rostad Arne G. Krog John Ove Ottestad Benedikte Bettina Bjørn Torstein Indrebø Even Søfteland Trond Bakke Jens Eghøj Nielsen Deputy members 1. Ivar Kvinlaug 2. Randi Dille 3. Haldor Lillebø 4. Kari Stavne Reitan Employee representatives Jon Aniksdal Elisabeth Katai Knudsen Lars Foyn Åsa Holmberg Vibeke Thomassen Roger Warud Petter Aasen Deputy members 1. Ellen Kristine Enger 2. Harry Helmersen 3. Hanne Rennemo gitte Tryk (Nordic) Bjørn Iversen, Chairman (Chairman of the Board of the Gjensidige Foundation) Jan Eyolf Brustad, (Chairman of the nomination committee in the Gjensidige Foundation) John Ove Ottestad Benedikte Bettina Bjørn Kirsten I. Værdal Representatives for the employees members of the supervisory board who participate in the nomination committee s work of nominating the Chairman and a deputy Chairman of the Board of Directors. Jon Aniksdal Elisabeth Katai Knudsen Sven Iver Steen, Chairman Hallvard Strømme Lise Lotte Aune Lee

gjensidige annual report 2010 57 Glossary The following explanations are not meant to be technical definitions, but to give a general and fundamental understanding of some of the key concepts that are used in the annual report. Combined ratio Combined Ratio (CR ) is a key figure in the insurance sector and shows the ratio of costs (both claims incurred and operating expenses) to earned premiums in the general insurance operations. The combined ratio is equal to the sum of the loss ratio and the cost ratio. EBITA Stands for Earnings before Interest, Taxes and Amortisation. The EBITA margin is EBITA as a percentage of the operating income. In Gjensidige, EBITA is employed as a key figure in the health segment. Return on equity before tax Earnings before tax as a percentage of average equity during the period. Net of reinsurance Premiums and claims can be reported net of reinsurance ; i.e. a deduction is made for the reinsurer s portion. Gross premiums written Gross premiums written include the amounts the Company has received or is owed as payment for insurance contracts when the insurance period has started. Underwriting reserves Accounting provisions that cover unearned premiums that have fallen due, claims that are expected to be incurred and expected costs related to closure of claims incurred. IFRS Stands for International Financial Reporting Standards and is an international accounting standard that is in effect in the EEA. Gjensidige has reported its consolidated accounts in accordance with IFRS since 2007. Cost ratio Expresses the ratio of the total insurance-related operating expenses to the earned premiums. Earned premiums The sum of premiums from all insurance contracts in a given period (the consideration period). If the contract period for an insurance policy deviates from the consideration period, only the portion of the premium that coincides with the consideration period will be included. Earned premiums are calculated on the basis of the date when the premium is recognised as earned in the income statement, regardless of when the premium is paid. Reinsurance Reinsurance is a contract between an insurance company and a reinsurer, where the insurance company transfers a portion of an insurance policy to the reinsurer. This is a method of risk moderation in order to protect equity. Loss ratio The loss ratio expresses the ratio of claims incurred to the earned premiums. Capital adequacy Capital adequacy is an expression for creditworthiness and expresses the insurance company s ability to handle its insurance liabilities. Capital adequacy is calculated as solvency margin capital as a percentage of solvency margin requirements. Solvency margin capital should exceed the solvency margin requirement. Solvency margin capital The capital that can be counted, pursuant to the regulations, as coverage of the solvency margin requirement is called solvency margin capital. Solvency margin requirements Insurance companies must meet a solvency margin requirement that is an expression of the risk associated with the insurance liabilities. The requirement that must be met is calculated on the basis of the company s insurance liabilities. Underwriting Underwriting is the risk and price assessment that is made when drawing up an insurance contract. The underwriting profit is the earnings of the insurance operations and does not include the earnings from financial investments. perspective governance

58results

gjensidige annual report 2010 59 report of the Board of Directors The Gjensidige Group achieved a profit before tax of NOK 3,254.0 million in 2010. The Board of Directors recommends that NOK 2,350.0 million be paid in dividends, corresponding to 80 per cent of the Group s profit for the year after tax. The Group s general insurance operations achieved satisfactory profitability in 2010 even though the results were affected by a harsh winter in the first and part of the fourth quarter. Measures initiated in order to reduce expenses have yielded the intended results, and the cost ratio improved considerably in 2010. The underlying loss ratio also trended positive throughout the year. The business areas Pension and savings and Online retail banking enjoyed a positive trend in 2010, and the banking operations reported their first year with a profit before tax. The health care operations reported a slight increase in operating income from 2009 to 2010, primarily as a result of some minor acquisitions. The business area reported a profit and an adequate EBita margin for 2010. Hjelp24 offers products and services in corporate health care services, personal security alarm services, private hospital and specialist services and work environment surveys. Objectives and strategies Gjensidige s overall objective is to be a leading, profitable, customer-oriented Nordic general insurance company. The general insurance operations are the Group s core operations. The Group s other target areas shall mainly support the core operations by offering a broad range of relation-building products and services, such as banking and pensions and savings to the Norwegian general insurance customers, while achieving economies of scale by investing in general insurance operations in the Nordic countries and the Baltic. perspektiv results The return on the financial investments was adequate in 2010, with a return on financial assets of 5.2 per cent. OPERATIONS Gjensidige Forsikring asa, (Gjensidige Forsikring) has its head office in Oslo. The purpose of the business is to meet the security needs of its policyholders by offering competitive insurance products and other related services. Gjensidige Forsikring is the parent company in the Gjensidige Group (Gjensidige). The Group s core business operations are in general insurance, and about 76.1 per cent of these operations, measured in gross premiums written for 2010, are tied to Norway. Gjensidige is the largest Norwegian-owned general insurance player in the Norwegian, Danish, Swedish and Baltic insurance markets. The general insurance operations include products in both general insurance and insurances of the person. The Norwegian general insurance operations also include life insurance, which is a pure risk insurance of at most one-year s duration. Group life insurance is the largest product here. Now that the greater part of the Danish and Swedish operations are organised through branches of the Norwegian parent company, these products will also be introduced in Denmark and Sweden under the Norwegian licence. In the private market, which in Norway also includes the agricultural market, the Group offers insurance products related to the motor vehicle, housing, personal, agricultural and other insurance products, such as travel and leisure insurance. In the commercial market, which also includes municipalities and municipal operations, the Group offers insurance products related to motor vehicle, property, personal, liability and marine/transport. In Norway, Gjensidige also offers products in pensions and savings to private and commercial customers, as well as banking services for private customers. Furthermore, the Group offers health services through Hjelp24 as (Hjelp24). Gjensidige s business model is based on an integrated value chain from provision of financial services and products through distribution and ownership to customer relations. This facilitates the streamlining of all processes and deliveries, which in turn helps promote high efficiency and low cost ratios. Together with a strong brand and a customer base of almost one million customers, this gives Gjensidige a sound position in the Norwegian general insurance market. An important part of the strategy for the core business operations is to maintain a disciplined approach to the insurance risks that are written. In this way, the Group s long experience and large amounts of data constitute a significant competitive advantage. For Gjensidige, profitability in the insurance operations is given priority over increased market shares. One consequence of this is that in recent years Gjensidige has given less priority, for example, to personal risk products and withdrawn from the markets for supply ships, offshore installations and foreign fishing vessels as a result of low product profitability. In order to further develop the Norwegian core business operations, priority is given to offering the customers a broad range of products in general insurance and insurances of the person. Gjensidige is currently a complete supplier of these products to Norwegian private and commercial customers. A further development and expansion of the loyalty and organisation customer programmes are important in order to broaden the depth and breadth of existing customer relations. This helps increase the number of satisfied customers and reduce the loss of business, and it supports the sale of banking, pensions and savings products to insurance customers. The Group s own data shows that customers who enter into a customer programme in the private and agricultural market are customers with Gjensidige for an average of a little over 12 years, whereas other customers stay with Gjensidige for an average of a little over five years. Customer services in Norway are organised in two divisions, Private and Commercial. Variation and breadth in the distribution system are important in order

60 gjensidige annual report 2010 Board of Directors The Board of Directors has nine members, of which three are elected by and amongs the employees. The composition of the Board of Directors shall be in accordance with the general requirements (expertise, gender and location) stated in the Companys Articles of Association. In 2010 19 board meetings were held. to be able to meet the various customer groups desires and to be able to better handle new sales, renewals and cross-sales activities. The Group invests substantial funds in the development of technology-based and cost-effective distribution channels, e.g. telephone-based sales and customer centres and an integrated Internet portal. New sales will be conducted through these distribution channels to a greater extent than before. The Group s focus on the more relationship-building product and service areas of banking, pensions and savings, and health services shall strengthen the Group s competitiveness and help develop Gjensidige as a customer-centric player. The Group s substantial customer base represents a unique opportunity to succeed with profitable growth through the cross sale of new services to insurance customers. A diversified product portfolio will allow Gjensidige to capitalise to a greater extent on the value of its existing customer base and distribution platform. At year-end 2010, 84.8 per cent of the pensions and savings customers and 48.8 per cent of the banking customers were also general insurance customers in Gjensidige. Gjensidige s health services company, Hjelp24, has grown considerably since its start-up in 2001, and it is currently the largest and leading player in the private health services sector in Norway. The business area currently functions as a support area for the Norwegian general insurance operations, and the services are especially intended for the Norwegian commercial customers. The Board of Directors has asked management to assess whether Hjelp24 should remain a wholly-owned part of the Group s broad-based activities in Norway. The Nordic market for private health services is characterised by substantial growth and development. The management will assess whether Hjelp24 can be given better conditions for taking part in this development through other structural solutions. It is expected that a conclusion will be drawn during the second half of 2011. Gjensidige has a long history in life and pension insurance operations, first directly through Gjensidige Livsforsikring, which later became Gjensidige nor Spareforsikring, and indirectly in Vital Forsikring asa through the stake in DnB nor. In 2006, Gjensidige restarted a separate pension insurance business in Gjensidige Pensjon og Sparing. That same year, the Group purchased its first shareholding in Storebrand. Gjensidige currently owns 24.33 per cent of the shares in Storebrand. The stake is regarded as a long-term strategic investment, and together with Gjensidige s own investment in the pension market it gives the Group a substantial exposure in the Norwegian and Swedish life insurance markets. Through growth in general insurance in the Nordic countries and the Baltic, the Group shall achieve economies of scale in the form of synergies that contribute to long-term value creation, increased competitive strength through the addition of new customers and greater risk diversification through a larger and more diversified portfolio. The cost synergies are especially achieved in the areas of reinsurance, development and management of insurance products, common guidelines for underwriting, more efficient capital allocation, and common support and ICT solutions. There is also a potential for synergies on the income side. The Group s Danish operations have leading expertise in insurance solutions for the municipal sector, for example, which is a valuable platform for the Group s development of corresponding offers in the other Nordic countries. Furthermore, Gjensidige s expertise in multi-distribution channels in Norway amounts to a significant competitive advantage that should also be utilised in the other markets. In addition to organic growth, Gjensidige will also seek to achieve growth in the future through the acquisition of businesses that support the Group s growth strategy within its broad range of products and geographical area, provided that the transactions support the Group s long-term return on equity requirements within three years. The insurance operations that are acquired must also deliver results that lie within the Group s combined ratio target within two to three years after acquisition. The Group s financial targets are discussed in greater detail below. The Group s capital management is based on Gjensidige s internal risk-based capital model and should ensure that the capital cost is taken into consideration when making decisions on the allocation of capital. This allows the management to assess the relationship between risk in the investment and the insurance operations while ensuring that the pricing of the insurance products reflects the capital cost and the long-term profitability requirements. On Friday, 10 December 2010, Gjensidige Forsikring was listed on Oslo Børs (the Oslo Stock Exchange). The purpose of the stock exchange listing is to give the Group greater freedom of action and opportunities to participate in the structural changes that affect the financial industry in the Nordic region. The listing has given the Group a security that can be used for possible acquisitions or to finance the strategy for growth in the Group s range of products and geographical scope in some other way, in addition to placing a value on Gjensidige. Gjensidige is, and shall be an attractive workplace that attracts, challenges and develops motivated and competent employees and managers. This will be achieved through a strong focus on management and employee development, the development of good reward models and a systematic effort to further develop the skills in the organisation. Training to develop the Group s managers, sales and skills is offered at the Gjensidige Academy, where the resources are concentrated.

gjensidige annual report 2010 61 Inge K. Hansen Chairman of the board Hansen was appointed chairman of Gjensidige s Board of Directors in 2008. Mr. Hansen acts as an adviser. He has previously held various executive positions, such as group director and CFO of Statoil, Ceo of Aker Kværner and adviser to Aker asa. He is the chairman of the Board of Directors of Siriusungen as, NorSun as, Bertel O. Steen, Hotell- og Restauranthuset Continental as, Leonhard Nilsen og Sønner as and a member of the Board of Directors of NorWind as, Hydro asa, Jiffy International as, Sissener as and Master Marine as. Mr. Hansen is a graduate of the Norwegian School of Economics and Business Administration (NHH). Hansen has been present at 18 board meetings. Financial targets Gjensidige s primary financial target is a return on equity of 15 per cent before tax. The Group s return on equity before tax came to 14.4 per cent in 2010, which was slightly below the targeted level. As mentioned in the introduction, the profit for 2010 was affected by the harsh winter in the first and part of the fourth quarter, which had a negative impact on the return on equity. The Group should have a capitalisation that ensures an A rating. Gjensidige has substantial capital buffers relative to internal risk models, statutory capital adequacy requirements and an A rating. The Group s A rating was last confirmed by Standard & Poor s in August 2010. The sound capitalisation has been crucial in the formulation of the Board of Directors dividend policy. The target is to distribute from 50 to 80 per cent of the Group s profit after tax for the year as dividends. The dividend policy and the Board of Directors proposed dividend for the 2010 financial year are commented in greater detail in the section on the allocation of profit. Up to 2008, the Group had a target of an average combined ratio of 97 per cent for the Norwegian general insurance operations. In connection with the Board of Directors evaluation of the Group s strategy and financial targets in 2008, the target was reduced to a combined ratio of between 90 and 93 for the total general insurance operations effective starting in 2011. One important consequence of the revised profit target is that the Group gives priority to insurance profitability and a balanced portfolio over increased market shares. In order to obtain satisfactory profitability there is in recent years carried out a substantial premium increase and new rate models have been introduced in combination with the introduction of a basic premium of nok 180 per policyholder starting in the second half of 2010. Furthermore, in 2008 an efficiency improvement programme was launched in order to reduce the claims incurred by nok 400 to 500 million and the operating expenses by nok 300 to 400 million. Both of the programmes were completed at year-end 2010, with cost reductions within the targeted levels. The combined ratio for the general insurance operations came to 95.3 per cent in 2010. When the implemented measures take full effect, it is expected that the combined ratio will lie within the targeted level starting in 2011. As part of the strategic update, the Board of Directors has set a goal that the general insurance operations should achieve a cost ratio target of 15 by 2015. Various measures shall be implemented in order to achieve this target, the most important of which are related to the automation and reinforcement of self-service solutions, the relocation of functions and the simplification of the product structure. Both the pensions and savings operations and Gjensidige Bank are still in a startup phase. The bank achieved a profit in 2010, whereas the equivalent target for pensions and savings is a profit in 2011. Within three years, both operations shall yield a return in accordance with the Group s long-term target for return on equity. The target for the health service operations is an EBita level between six and eight per cent. In 2010, the health service operations achieved an EBita of 5.0 per cent. This was adequate in a year where our income has been significantly affected by the loss of some major contracts. Market position Gjensidige was the leading non-marine general insurance player in Norway in 2010 with a market share of 27.9 per cent in an overall market of nok 42,956 million. (Source: Finance Norway, Fno.) Compared with 2009, the market share decreased by 0.5 percentage points (from 28.4 per cent in 2009). This change was mainly attributed to increasing competition, both from established financial groups with a new and broader range of products and from foreign insurance players. In the private segment the Company had a market share of 25.4 per cent. In the commercial segment, also including insurances to the agricultural market, the market share amounted to 33.4 per cent. In the agricultural market considered in isolation, the market share was 71.3 per cent in an overall market of nok 1.200 million. In the Baltic general insurance market, Gjensidige had a market share of 6.9 per cent in 2010 (Source: Insurance Supervision Authorities of Latvia, Lithuania, Estonia; Estonia Statistics; Gjensidige Baltic reports; Swedbank Varakindlustus interim Q4 report), which is just under the targeted level of a ten per cent market share. The market shares in Denmark and Sweden were respectively 5.8 per cent (based on the last available statistics from Danish Insurance Association (F&P) per December 2010) and 1.3 per cent (source: The Swedish Insurance Federation, statistics per fourth quarter 2010). In a three to five year perspective, Gjensidige has a goal of becoming the third-largest general insurance company in the Nordic countries, measured in earned premiums. At year-end 2010, the Group was the fourth largest player (source: Gjensidige s own calculations). Customer orientation Gjensidige has chosen customer orientation as a strategic direction for the Group. This is deeply rooted in the Group s vision of knowing the customer best and caring the most. In a highly competitive market, customer satisfaction will be increasingly important in order to stand out from the competitors, perspektiv results

62 gjensidige annual report 2010 GuNNhild H. andersen Board member Andersen (employee representative) was appointed to Gjensidige s Board of Directors as an employee representative in 2008. She is a customer advisor in Gjensidige with more than 20 years experience in the insurance sector. Ms. Andersen is a member of the board of finance sector union s geographic division Østfold. Andersen has been present at 19 board meetings. and it will be an instrument for ensuring customer loyalty and encouraging customers to choose more products. In order to get an assessment of Gjensidige in comparison with other companies, Gjensidige has chosen to take part in the sector-independent Norwegian Customer Barometer survey. The aim is for Gjensidige to establish itself over a period of time as one of the ten companies with the highest customer satisfaction in Norway. In recent years, the customer satisfaction score has been one of the best among banking and insurance companies. The aim is to further improve this performance so that satisfied customers become Gjensidige s strongest characteristic and most important competitive advantage. Gjensidige has established a common framework for the Group s customer orientation - The GjensidigeExperience - with the following four organisational principles: We keep our promises We always provide quality We make the complicated simple We ensure that the customer is satisfied These principles shall give the organisation a clear direction and act as guiding principles for Gjensidige s customer-oriented value creation and development. With The GjensidigeExperience as a basis, systematic efforts are being made to improve customer satisfaction. A comprehensive group programme has been initiated to identify and improve the perceived value of being a customer of Gjensidige. Under this programme, nearly 80 improvement measures were initiated in 2010. In order to support the improvement efforts, Gjensidige is conducting its own measurements of the ways in which the customers perceive the service that is provided. The service satisfaction is measured and monitored continuously all the way down to the employee level. Distribution Gjensidige has a little less than a million insurance customers in Norway, about 860,000 private customers and 90.000 commercial customers. The private customers are served through a variety of distribution channels, such as local offices, customer and sales centres, and the Internet, whereas the commercial customers are served by telephone and by business centres and through local representatives. The 500 biggest commercial customers are served by a separate organisational unit together with customers through the system of brokers. The distribution of roles among the various channels has been modified and clarified in recent years. Among other things, this entailed a reduction in the number of local offices from 141 at year-end 2005 to 50 at year-end 2010. At the same time, sales centres (outgoing call centres) were established to improve the efficiency of new sales. At year-end 2010, a total of 21 of the 50 local offices had been upgraded to financial offices, which are offices offering the full range of products so that they can attend to all of the customers needs in insurance, banking, pensions and savings. The customers are now offered products and services through one point of contact, which greatly improves the possibility of increased sales of a broader range of products. Gjensidige has good, effective solutions for sales over the Internet. Gjensidige. no is a complete financial portal for insurance, banking, pensions and savings. Gjensidige has launched a new shopping basket where the customer can buy insurance products online, and it has established new login pages for private and corporate customers. Here the customers get a complete overview of own products and services, and they can manage their customer relations with Gjensidige, e.g. report a claim or change a fund. There were 7.8 million visits to gjensidige.no in 2010, an increase of 40 per cent from 2009. Sales over the Internet increased by almost 15 per cent from 2009 to 2010. Continued rapid growth is expected in this distribution channel. The Danish private market is mainly served by phone from a customer centre in Copenhagen and over the Internet. In addition, private products are sold through partners, including Kia Motor, the Danish Consumers Co-operative Society (FDB), the Danish Association of Managers and Executives and edc, Denmark s largest estate agency chain. In the Danish commercial market, the distribution is mainly conducted in cooperation with brokers. In connection with the acquisition of Nykredit Forsikring, a long-term distribution agreement with the Nykredit Group was also signed. Nykredit is one of Denmark s largest financial groups, with an extensive distribution network with 70 branch offices and two estate agency chains with 310 offices in addition to a telephone-based customer centre. Nykredit distributes general insurance on behalf of Gjensidige to both the private and commercial markets. In the Swedish private market, the distribution is conducted both directly by phone and Internet and through insurance mediators (partners and agents). In the commercial market, the distribution is mainly through insurance brokers and partners. The most important distribution channels in the Baltic market are direct sales and sales via insurance agents and brokers. Sales over the Internet are also becoming more important in the Baltic market. In the municipal market, the distribution takes place either directly or by brokers and is largely based on competitive tenders.

gjensidige annual report 2010 63 TROND vegard ANderseN Board member Andersen was elected member of Gjensidige s Board of Directors in 2009 after being a member of the owners committee for East Norway since 2005. Mr. Andersen is the managing director of Fredrikstad Energi as and has previously held the position senior manager of PricewaterhouseCoopers., He is also chairman or member of the Board of Directors of all Fredrikstad Energi s subsidiaries, and board member of Værste as. He is a Certified Public Accountant and holds a Master of Science in Business and Economics from the Norwegian School of Business Economics and Administration (NHH). Andersen has been present at 19 board meetings. Gjensidige has also positioned itself for the delivery of products adapted to a variety of distribution channels (white label) both in Norway and in the rest of the Nordic region. The distribution is mainly through agents and business partners, such as shops, car dealers and banks that want to expand their range of products to include insurance products under their own brand. Year 2010 Important events 2010 was an eventful year for Gjensidige. Through the acquisition of Nykredit Forsikring, the Group established a sound platform in the Danish market. After the acquisition, the operations outside Norway amount to about one fourth of the Group s general insurance operations. The conversion of the parent company, Gjensidige Forsikring, from a mutual company to a public limited company has ensured Gjensidige a long-term source of financing and improved the Group s strategic flexibility. On 8 March 2010, Gjensidige signed an agreement on the acquisition of Nykredit Forsikring from the Nykredit Group, and the acquisition was carried out at the end of April 2010. At the same time, Gjensidige and the Nykredit Group entered into a long-term strategic partnership, which entails that the Nykredit Group shall sell and distribute Gjensidige s general insurance products in the Danish market. Increased volume in combination with the strategic distribution agreement improved Gjensidige s competitive strength in the Danish market. At the same time, the acquisition helps Gjensidige achieve further cost synergies through economies of scale. Annual cost synergies before tax of about nok 230 million have been identified and are expected to be fully achieved by 2014. These synergies mainly involve distribution, ICT, reinsurance, coordination of shared functions and implementation of Gjensidige s group functions. Integration costs were estimated at about DKK 170 million and will mainly be charged to the accounts in the period from 2010 to 2012. Starting on 1 January 2010, the Danish insurance operations were organised as a branch of the Norwegian parent company. The exception is Danish work injury insurance, which is organised in the Group s Danish company for work injury insurance, and the private portfolio in Nykredit Forsikring. The Swedish operations were organised into branches in the autumn of 2009. The establishment of branches improves the premises for working internationally at the same time as a simplified decision-making structure contributes to more efficient operations.the organisation into branches has a positive effect on the objective of reducing expenses. During 2010, further efforts were made with implemented measures that were supposed to help achieve the revised target for the combined ratio of between 90 and 93 starting in 2011. The main efforts with regard to sales were measures that are expected to increase the market power over a period of time. Among other things, this includes a separate customer and brand school for training and instruction of salespersons and sales managers, which was started up in 2009. This school is meant to help give Gjensidige a leading position in the development of concepts for the sale of services through a modern sales culture and high professionalism in the dialogue with customers. Gjensidige s Customer and Brand School has also developed training programmes for claims managers and claims staff and is part of the Gjensidige Academy, which was established in 2010. In addition, we are working on new insurance rate models to ensure correct pricing of insurance risk. In June 2010, a new home insurance rate was adopted, which is expected to make the Company more competitive in the various customer segments by yielding a price that is more adapted to individual risk. In order to reduce the level of claims incurred by between nok 400 and 500 million (from the 2007 level, adjusted for inflation) by 2011, a number of projects were initiated a total of about 350 different measures that can be broken down into three main categories: Measures to reduce the claims processing time, which, among other things, will give lower compensation for loss of income, taxes and interest. Measures to reduce the claims processing expenses through increased efficiency in the settlement organisation. Introduction of new technology and new service solutions shall support our efficiency improvement aims. Measures to prevent or reduce claims incurred through a greater focus on the detection of fraud and greater utilisation of the possibilities of reducing and recovering benefits. Considerable efforts have already been made to reduce claims incurred, and at year-end 2010 the project was completed according to plan. In addition, administrative operating expenses shall be reduced by between nok 300 and 400 million (from the 2007 level, adjusted for inflation) starting in 2011. This shall mainly occur as a result of efficiency improvement of the staff and support functions that have taken place in recent years, e.g. through the introduction of staff and support functions that cover all of the Nordic operations and through staff cutbacks. This programme was also completed as planned by year-end 2010. Long-term agreements with the labour organisations Tekna and the Norwegian Society of Engineers and Technologists (nito) were renewed in the autumn of 2010. In January 2011, the agreement with the Confederation of Vocational Unions (YS) was renewed with a time frame of eight years. The agreements represent 206,000 customers out of a potential membership of 330,000 members, and the business volume comes to nok 1.9 billion. perspektiv results

64 gjensidige annual report 2010 Hans-Erik andersson Board member Andersson was elected member of Gjensidige s Board of Directors in 2008. Mr. Andersson acts as an adviser and has previously held the position of Ceo of Skandia as well as Nordic chairman for Marsh & McLennan and Executive Director of Mercantile & General Re. He is also chairman of the Board of Directors of Semcon AB, Erik Penser ABand Canvisa AB and a board member of Cision AB. Mr. Andersson has studied statistics, economics, business law and administration at the Stockholm University. Andersson has been present at 18 board meetings. During 2010, the Norwegian Automobile Association (naf) decided to terminate its long-term collaboration with Gjensidige. The organisation has decided that it wants to assume a new role as a distributor of insurance in the coming years. Both parties do not want the customers to suffer as a result of this and are cooperating to ensure that they are safeguarded well. Gjensidige has initiated a number of activities to keep these customers, and the customers will receive several good offers and services in 2011. Roadside assistance services that were previously provided by naf will be provided by Falck in the coming years. In the Commercial business area, a major restructuring effort has been initiated in order to improve the business management, develop the organisation and modernise the distribution so as to increase our competence and competitiveness in the market. Multi-channel service will be introduced, where several channels will serve the segment together through centralised control of the activities aimed at the customers, and there will be efficient interaction. The objective is to share and preserve customer data and expertise in the Company to a greater extent. Core competence in analysis, underwriting, risk assessment and pricing models will simultaneously be improved in order to ensure profitability in the commercial segment. Changes in the regulatory framework Throughout all of 2010, Gjensidige has continued to work on preparations for the Solvency ii regulations, which will entail a new standard for calculating capital requirements, requirements for risk management and reporting of the risk and capital situation in European insurance companies. The Solvency ii regulations are still under development and are expected to come into effect at the beginning of 2013. The Group has made an assessment of the preparations that ought to be made in order to meet the new requirements in Solvency ii. Gjensidige is well-positioned to meet the new requirements, but there are areas where we can make further improvements between now and the time when the regulations enter into force. The Board of Directors is regularly informed about relevant topics pertaining to Solvency ii. Processes and functions in the Group are reviewed and assessed with regard to new and existing requirements, and changes are implemented in order to ensure a uniform risk management that is well-integrated with other management processes. Gjensidige aims to apply for approval of an internal model in order to calculate the regulatory capital requirements under Solvency ii. Since 2004, Gjensidige has developed a so-called Asset Liability Management (alm) model that is used in capital management. This model will be further developed in both scope and areas of use. Based on the information that exists about Solvency ii, it is assumed that the new regulations will result in requirements for higher capitalisation. At the same time, the requirements for good risk management will be made more stringent, and the requirements for reporting to the authorities and the market may help make the Company s value creation more apparent. Gjensidige is trying to utilise the forthcoming amendments to the Act in a constructive way in order to further improve the comprehensive risk management in the Group. COMMENts ON the ANNual accounts Gjensidige reports consolidated financial information in accordance with the International Financial Reporting Standards (IFrs). In accordance with the requirements in the Norwegian accounting legislation, the Board of Directors confirms that the prerequisites have been met for preparation of the accounts under the assumption that the Company will continue as a going concern and that the annual accounts have been prepared under this assumption. Gjensidige Forsikring BA was converted into a public limited company (asa) on 28 June 2010. The conversion was effected by transferring the entire business to a newly founded asa with full continuity of accounting values, financial history and classification of equity. Profit/(loss) The Gjensidige Forsikring Group had an underwriting profit for general insurance operations of nok 796.3 million in 2010, compared with nok 817.9 million in 2009. The profit after tax for the Group came to nok 2,950.4 million compared with nok 2,304.8 million in 2009. The profit for the year is equivalent to a return on equity before tax of 14.4 per cent, compared with 15.2 per cent in 2009. The profit per share (basic and diluted) came to nok 5.90, compared with nok 4.61 in 2009. Combined ratio was 95.3 per cent compared with 94.8 in 2009. Combined ratio for 2010 was affected by the harsh winter, but the underlying insurance operations reported an adequate profit. The sound profit from the Group s investment operations is the most substantial contribution to the good profit for the year. With the exception of actuarial provisions related to the Danish workers compensation portfolio, Gjensidige s actuarial provisions are recognised at nominal values (not discounted). Starting in the second quarter of 2010, in preparation for expected changes in IFrs and new solvency regulations (introduction of Solvency ii in 2013), Gjensidige has calculated, but not recognised, the effect on the combined ratio of discounting the compensation provisions. For 2010 as a whole, the combined ratio on a discounted basis would have been 90.4, a reduction of 5.0 percentage points relative to the recognised nominal amount.

gjensidige annual report 2010 65 Kjetil Kristensen Board member Kristensen was appointed to the Board of Directors of Gjensidige as an employee representative in 2008. He is a senior customer advisor in Gjensidige. Mr. Kristensen is also the senior employee representative for the private division and is member of the executive committee of the financial sector union of Norway. Mr. Kristensen studied ICT and economics at the University College of Finnmark. Kristensen has been present at 18 board meetings. In the calculation, a swap rate is used for the Norwegian and Swedish provisions, and an interest rate determined by the Danish Financial Supervisory Authority is used for the Danish provisions. A euro swap curve has been used for the Baltic provisions. Operating income Earned premiums, net of reinsurance from the general insurance operations amounted to nok 17,063.3 million in 2010, compared with nok 15,660.4 million in 2009, equivalent to an increase of 9.0 per cent. All in all, the general insurance operations outside Norway contributed nok 4,365.4 million in earned premiums in 2010, compared with nok 3,066.9 million in 2009. In the Norwegian private segment, earned premiums, net of reinsurance increased by 5.4 per cent in 2010. There is tough competition in the Norwegian private market, but implemented measures in premiums, sales and distribution have given Gjensidige increased market power in the private market. In the Norwegian commercial segment, Gjensidige has given priority to profitability over growth, which has resulted in a greater loss of business and a reduction in earned premiums. Much of the growth in premiums in 2010 was attributed to the acquisition of Nykredit Forsikring, which was consolidated as per 1 May 2010, in addition to organic growth in the Danish and Swedish business and especially in the commercial segment. In the Baltic, the total market shrank by 12 per cent in 2010, while Gjensidige had a reduction in earned premiums, net of reinsurance of 30.8 per cent. Corrected for exchange rate fluctuations, the reduction in local currency amounted to 24 per cent. Gjensidige s shrinking Baltic market share was reduced from 9.2 per cent in 2009 to around 7 per cent in 2010. This was attributed to the decline in the market in Latvia, which is the market in which Gjensidige has the greatest share of its Baltic operations, and which has been greater than the decline in the other Baltic markets. In addition, the Baltic market has been affected by reduced insurance premiums to a level that Gjensidige has chosen not to follow because it yields such a low profitability. Earned premiums, net of reinsurance from the pension operations increased by nok 116.3 million in 2009 to nok 335.8 million in 2010. The growth was mainly attributed to growth in the portfolio. Net interest and credit commission income for the banking operations amounted to nok 407.0 million in 2010, compared with nok 57.5 million in 2009. This increase was attributed to a higher volume, acquisition of the loan portfolio and an infusion of equity. For the health service operations, the operating income for 2010 was affected by tough competition related to public procurement. This has resulted in lower prices and margins on renegotiated contracts, but also the loss of individual contracts, where the price reduction was so great that it was not feasible to provide services under the new terms. Net income from investments The Group s net income from investments was nok 2,748.2 million in 2010, compared with nok 2,788.0 million in the previous year. At year-end 2010, the value of the Group s investment portfolio was nok 52,347.0 million. 4.8 per cent of the investment portfolio was invested in shares, 8.2 per cent in shares in associated companies, 15.9 per cent in money market instruments, 22.2 per cent in short-term bonds, 26.8 per cent in bonds held to maturity, 7.5 per cent in bonds classified as loans and receivables, 12.4 per cent in property and 2.2 per cent in hedge funds and other financial assets. Reduced credit spreads have given a somewhat lower return of 4.5 per cent on the fixed-income portfolio in 2010, compared with 6.6 per cent in 2009. The fixed-income portfolio has not been subject to losses resulting from bankruptcies of our debtors in 2010. The international part of the investment portfolio is almost fully hedged. The real estate portfolio gave positive earnings of nok 359.2 million in 2010, compared with nok 5.8 million in 2009. The current rental income in the real estate portfolio amounted to nok 422.7 million in 2010. The average return requirement in the real estate portfolio was 6.5 per cent at year-end, whereas it was 6.75 per cent for the first three quarters. The total value of the portfolio decreased by nok 3.2 million in 2010. The equivalent figure for 2009 was nok 213.6 million. In the international real estate funds, there was a negative return of nok 36.3 million in 2010, compared with a negative return of nok 106.6 million the previous year. All in all, the investments in equity and associated companies yielded a profit of nok 703.4 million in 2010, compared with a profit of nok 308.6 million in 2009. The exposure to equities at year-end 2010 consisted mainly of the items in Storebrand and Sparebank1 sr-bank along with the Group s private equity portfolio and short-term investments. Of the profit for 2010, the profit from associated companies amounted to nok 488.7 million, nok 342.2 million of which came from the investment in Storebrand and nok 142.1 million from the investment in Sparebank1 sr-bank. In 2009, the investments in associated companies contributed a profit of nok 263.3 million. The return on financial assets was 5.2 per cent in 2010. The return on financial assets was calculated as the net financial income and expenses (excluding financial income in Gjensidige Bank and Gjensidige Pensjon og Sparing) as a percentage of the investment portfolio (which includes all investment funds in the Group with the exception of funds in Gjensidige Bank and Gjensidige Pensjon og Sparing). The corresponding figure for 2009 was a return on financial assets of 5.5 per cent. perspektiv results

66 gjensidige annual report 2010 Gisele Marchand Board member Marchand was elected member of Gjensidige s Board of Directors in 2010. Ms. Marchand is president and Ceo of Eksportfinans asa, and has previously held various positions, e.g. as Ceo of Statens Pensjonskasse. She is currently a board member of Oslo Børs Vps Holding asa, Oslo Børs as, Norske Skogindustrier asa, the Norwegian Refugee Council, Fornebu Utvikling asa and giek Kredittforsikring as and chairperson of the audit committee for Scandinavian Property Development asa. Ms. Marchand has previously been the chairperson of Kommunekreditt as and a board member of Innovasjon Norge and edb Business Partner asa. Ms. Marchand holds a Master of Science in Business and Economics from Copenhagen Business School (Handelshøy skolen I København). Marchand has been present at 7 board meetings. Claims incurred, interest expenses, losses, etc. Claims incurred, net of reinsurance from the general insurance operations amounted to nok 13,456.6 million compared with nok 12,071.0 million in 2009. The loss ratio increased by 1.8 percentage points relative to 2009 and ended up at 78.9. The harsh winter in 2010 affected the claims incurred for 2010. The loss ratio was also affected by the higher level of major claims in 2010 than in 2009. Major claims amounted to nok 502.9 million in 2010, compared with nok 313.2 million the previous year. The Nordic segment in particular was affected by major claims in 2010, with a number of large fires. The run-off gain for previous claim years was somewhat lower in 2010 than in 2009. In 2010, the net run-off gain was nok 301.1 million, 1.8 per cent of earned premiums, net of reinsurance. The corresponding figures in 2009 were nok 310.2 million (gain) and 2.0 per cent respectively. The run-off gain in 2010 was primarily related to a positive trend in insurances of the person in both the Norwegian and Danish operations. The run-off gain in 2009 was negatively affected by a bolstering of the actuarial reserves related to the child insurance product. Both in 2009 and 2010, an effort has been made to develop the settlement processes further. The goal is to improve the level of customer satisfaction while simultaneously reducing the Company s total claims payments. This will be achieved, for example, by contacting customers more quickly after a loss or injury, while reducing the processing time considerably through improved internal processes. Interest expenses and losses on loans and guarantees from banking operations amounted to nok 484.9 million in 2010, compared with nok 268.8 million in 2009. The trend was mainly attributed to a larger portfolio. Operating expenses The cost ratio for general insurance (the operating expenses from general insurance relative to the earned premiums, net of reinsurance) was 16.5 per cent in 2010, compared with 17.7 per cent for the previous year. The nominal operating expenses from general insurance amounted to nok 2,810.4 million, compared with nok 2,771.5 million in 2009, an increase of 1.4 per cent. The nominal increase in operating expenses from general insurance was mainly attributed to the acquisition of Nykredit Forsikring, which was consolidated in the figures effective 1 May 2010. The efficiency improvement efforts in the staff and support areas as well as in distribution and in the settlement organisation have yielded profits. In the two Norwegian segments, Private and Commercial, the nominal operating expenses were reduced by nok 101.9 million and nok 43.3 million respectively in 2010. The nominal operating expenses increased somewhat in the Nordic countries segment. Most of the increase was attributed to the acquisition of Nykredit Forsikring, but also to growth in the Swedish operations and an increased share of the partner-distributed business in the Norwegian white label business. In the Baltic segment, the nominal operating expenses were reduced by nok 74.8 million. The cost level in the Baltic operations has rapidly adapted to the decline in earned premiums as a result of the sharp decline in the total market, with a cost ratio of 29.8 for 2010, compared with 31.9 for 2009. The pensions and savings operations had total operating expenses of nok 156.7 million in 2010, nok 109.6 million of which were related to the insurance operations. The equivalent figures for 2009 were nok 179.0 million and nok 102.7 million respectively. Operating expenses for the banking operations amounted to nok 302.1 million in 2010, compared with nok 147.2 million in 2009. The equivalent figures for the health segment were nok 517.3 million and nok 476.5 million respectively. Depreciation and impairment losses of excess value were related to intangible assets, including acquired assets related to customer relations and brands in business combinations, together with the value of internally developed it systems. Depreciation and impairment losses amounted to nok 254.3 million in 2010, compared with nok 216.7 million in 2009. Some of the depreciation and impairment losses in 2010 were attributed to the impairment loss of goodwill of nok 100 million in the Nordic countries segment. After the acquisition of Tennant in 2007, the Norwegian branch was streamlined as a white label business for Gjensidige. The changes during 2009 and particularly in the beginning of 2010 entail that the original business model has been considerably adjusted, and the value at the date of acquisition has been reduced. In 2009, a net impairment loss of goodwill of nok 93.0 million was conducted for the Baltic operations and likewise nok 22.5 million in the Nordic operations. Gjensidige s consolidated accounts were not charged with expenses for research and development in 2010 or 2009, nor were these expenses capitalised during the two financial years. The parent company has continued its collaboration with the Norwegian Computing Centre and SFI (Statistics for Innovation), where climate and price elasticity projects are being implemented. Tax The Group had a tax charge of nok 303.6 million in 2010, compared with a tax charge of nok 861.8 million in 2009. The effective tax rate came to 9.3 (27.2) per cent in 2010. After conversion from a mutual company to a public limited company, Gjensidige Forsikring is no longer subject to capital taxation, which has a permanent positive effect on the tax rate. In 2009, the capital taxation amounted to nok 36.0 million of the tax expense.

gjensidige annual report 2010 67 GuNNar Mjåtvedt Board member Mjåtvedt was appointed as an employee representative to the Board of Directors of Gjensidige in 2007. He is Gjensidige s senior employee representative. Mr. Mjåtvedt s background is in sales and management, and he has nearly 20 years experience in the insurance sector. Mjaatvedt has been present at 19 board meetings. Conversion from a mutual form of ownership to a public limited company initially triggers taxation as a result of the sale of the transferred assets when they are transferred to the newly founded limited company. The Ministry of Finance has consented to an exemption for Gjensidige Forsikring from capital gains taxation on the transfer of business to the newly formed public limited company under certain conditions, given that Gjensidigestiftelsen is being taxed by sale of shares in Gjensidige Forsikring asa. The consequences of the tax relief decision have been incorporated into the tax expense and tax liabilities. The tax relief decision involves greater complexity and discretionary assessments, until all of the effects have ultimately been evaluated by the tax authorities. Off-balance sheet obligations and derivatives As part of the Group s investment operations, an agreement has been entered into relating to the investment of a maximum of nok 705.8 million in various private equity investments and real estate funds in excess of the amounts recorded on the balance sheet. Gjensidige is liable externally for any insurance claim arising in the cooperating mutual fire insurers fire insurance operations. To increase the efficiency of the investment management and risk management, the Group enters into financial derivative contracts on a regular basis. These contracts are described in greater detail in the notes to the financial statements. perspektiv results The low effective tax rate for 2010 is attributed to several non-recurring items, including the tax relief decision, the recognition of differences in estimates related to the calculated tax for 2009 and tax-free dividends. The largest single effect is the results of the tax relief decision, which reduces the tax expenses by nok 333.0 million for 2010. Corrected for this and other non-recurring items, a normalised tax rate for the year as a whole would have been 22.2 per cent. Balance sheet and capital base The Group had a balance sheet total at year-end 2010 of nok 84,106.8 million compared with nok 74,868.9 million in 2009. This growth is mainly attributed to growth in the Pension and savings and Online retail banking segments. Gjensidige s equity amounted to nok 23,137.8 million as of 31 December 2010, compared with nok 21,968.2 million at the end of the previous year. This was equivalent to an increase in equity of 5.3 per cent in 2010. The Group s capital adequacy was 16.1 per cent at year-end 2010, compared with 18.9 per cent at year-end 2009. The statutory requirement is eight per cent. In addition to testing the capital with regard to legal requirements, a calculation of the capital requirements for the Group s operations is made on a quarterly basis. This calculation is done in the Group s internal risk models, which are based on a financial valuation of assets and liabilities. The principles are consistent with those expected to apply after the introduction of the Solvency ii regime. Capital in excess of this amount constitutes the Group s excess capital. In order to determine the final excess capital, a deduction is made for estimated requirements for additional capital needed to maintain the Group s A rating from Standard & Poor s, which was most recently confirmed in August 2010. At year-end 2010, the excess capital was calculated to be nok 6.4 billion, taking into consideration the proposed dividend of nok 2,350.0 million. The Board considers the Group s capital situation and financial strength to be good. Cash flow Net cash flow from operational activities consists primarily of receipts in the form of premiums and consideration for the sale of investment assets and payments in the form of claim settlement costs, the purchase of reinsurance, administrative expenses and taxes. Net cash flow from operational activities was positive at nok 4,253.3 million in 2010, compared with a negative cash flow of nok 3,914.5 million in 2009. Net cash flow from investment activities consists mainly of payments and disbursements in connection with the acquisition of subsidiaries, owner-occupied property and plant and equipment. Net cash flow from investment activities was negative at nok 2,916.6 million in 2010, compared with a negative cash flow of nok 174.7 million in 2009. Net cash flow from financing activities consists mainly of payments and disbursements related to external debt financing and from the shareholders. Net cash flow from financing activities was negative at nok 1,624.2 million in 2010, compared with a positive cash flow of nok 4,288.6 million in 2009. For 2010, the net cash flow was affected by the payment of dividends of nok 1,677.6 million. In 2009, net cash flow was affected by external borrowing in Gjensidige Bank of nok 2.7 billion in connection with the acquisition of Citibank s Norwegian consumer loan portfolio. THE segments Private Norway The private area offers general insurance related to motor vehicles, property, insurances of the person and agriculture in the Norwegian private and agricultural markets. Earned premiums, net of reinsurance were nok 8,279.4 million in 2010, an increase of 5.4 per cent from the previous year. The trend in earned premiums in 2010 reflects the effect of implemented premium increases. New premium

68 gjensidige annual report 2010 Mari T. Skjærstad Board member Skjærstad was elected member of Gjensidige s Board of Directors in 2010. Ms. Skjærstad is a partner at the law firm Johnsrud, Sanderud & Skjærstad as, and the chairperson of the Board of Directors of Furnes-Hamjern SCC as, Hedmark Trafikk FKF, BoligPartner as, Ervod Production & Distribution as and The Norwegian Association of Public Transport. She is also a board member of amongst others Mesta as, Scana Industrier asa and Norfund. Ms. Skjærstad holds a law degree. Skjærstad has been present at 8 board meetings. rates for the motor vehicle and home-owner products, introduced in the autumn of 2009 and the summer of 2010 respectively, ensure a more correct pricing of risk. Claims incurred, net of reinsurance came to nok 6,296.7 million in 2010, compared with nok 6,007.4 million in 2009. The loss ratio came to 76.1 in 2010, compared with 76.5 in the previous year. Claims incurred for 2010 were affected by the frost at the beginning of the year, whereas claims incurred for 2009 were affected by a substantial bolstering of the actuarial reserves for the child insurance product. Large losses came to nok 107.5 million in 2010, compared with nok 42.7 million the previous year. Claims incurred for 2010 were positively affected by the run-off gains, as opposed to a run-off loss in the previous year, primarily as a result of the effect of bolstering the actuarial reserves for the child insurance product in 2009. The cost ratio was 14.4 for 2010, a reduction of 2.1 percentage points compared with the previous year. Nominally, expenses were reduced by nok 101.9 million in 2010 relative to 2009. This reduction came as a result of the efficiency improvement efforts. The combined ratio for 2010 was 90.5 per cent, compared with 93.0 in 2009. The underwriting profit amounted to nok 788.2 million in 2010, compared with nok 552.4 million the previous year. Commercial Norway The commercial segment offers general insurance products in liability, property, insurances of the person and motor vehicle, as well as within marine/transport. Earned premiums came to nok 4,418.5 million in 2010, a decrease of 6.7 per cent from the previous year. The reduction in premium volume was mainly attributed to a clear prioritisation of profitability over volume, e.g. by discontinuing specific segments in the marine portfolio in 2009 and giving less priority to the insurances of the person portfolio. Claims incurred came to nok 3,602.6 million in 2010, compared with nok 3,819.0 million in 2009. For 2010, the loss ratio was 81.5 and 80.6 in 2009. Claims incurred are affected by the frost in the beginning of the year. The level of major claims was somewhat lower in 2010 than in 2009, and amounted to nok 189.5 million (193.1). At the same time the run-off gain was somewhat higher in 2010 compared with 2009. The development in recent years with a high number of frequency claims makes it necessary with continuing price increases on certain products, but to a lesser extent than already carried out. The cost ratio was 12.9 for 2010, which was the same as in the previous year. Nominally, expenses were reduced by nok 43.3 million in 2010 relative to 2009. As a result of the lower premium volume, cost-cutting measures were implemented in all parts of the business. Further measures are planned, and the management has devoted considerable attention to cost control. Combined ratio for 2010 was 94.4 per cent, compared with 93.6 in 2009. The underwriting result came to nok 245.8 million in 2010, compared with nok 305.0 million in the previous year. Nordic countries The business area, Nordic, includes the Group s operations in the Danish and Swedish private and commercial markets. This area also includes general insurance products to municipalities and municipal operations in Scandinavia. In addition, the area includes the Group s white label business, where the private market in Norway is the main target group. Earned premiums, net of reinsurance came to nok 3,906.1 million in 2010, an increase of 62.5 per cent from the previous year. This increase came primarily as a result of the acquisition of Nykredit Forsikring, which is included in the data starting on 1 May 2010, in addition to growth in the Danish and Swedish commercial business. Claims incurred, net of reinsurance came to nok 3,252.0 million in 2010, compared with nok 1,833.0 million in 2009. An increased business volume also gives increased claims incurred. Furthermore, the claims incurred in 2010 were affected by a harsh winter in Sweden and Denmark during the first quarter. In August 2010, a judgment was handed down by the Danish Supreme Court on calculating indemnity for part-time employees, and this judgment will result in a higher indemnity for many claims, including the re-opening of previously closed claims. Gjensidige s assessment is that the effect of the judgment is covered by the existing actuarial provisions. Therefore, the judgment has had no accounting effect for Gjensidige. The loss ratio came to 83.3 in 2010, compared with 76.3 in the previous year. The level of large losses was substantially higher in 2010 than in 2009, which had a negative effect on the underwriting profit. Among other things, the level of large losses in 2010 was affected by a large fire in Sweden and by heavy rains in Denmark in August. Total large losses came to nok 205.9 million in 2010, compared with nok 77.4 million the previous year. The run-off gain was lower in 2010 than in 2009. The cost ratio was 18.7 for 2010, an increase of 1.4 percentage points over the previous year. Nominally, expenses increased by nok 313.9 million in 2010 relative to 2009. The increase in the nominal expenses is mainly at-

gjensidige annual report 2010 69 Randi B. Sætershagen Board member Sætershagen was elected member of Gjensidige s Board of Directors in 2005, and has been the deputy chairperson of the Board of Directors since 2008. Ms. Sætershagen works as a consultant and temporary manager in various businesses through her own company. She has formerly held positions as managing director of Swix Sport as, and VP sales and marketing of Norsk Tipping as. Ms. Sætershagen is a board member in the Board of Directors of Gjensidigestiftelsen, Elsikkerhet Norge as, Briskeby Eiendom 1 as, Briskeby Gressbane as, Hamar Sportsanlegg as, Børstad Idrettsanlegg as, Briskeby Bolig og Hotel as and Posten Norge as. She is also a partner at the firm Alloc Kvalitetsgulv ans. She holds a Master of Science in Business and Economics from the Norwegian School of Management (BI). Sætershagen has been present at 19 board meetings. tributed to the acquisition of Nykredit Forsikring, including integration costs of nok 52.5 million, growth in the commercial segment in Sweden and an increased share of partner-distributed business in the Norwegian white label business. Efficiency improvement measures have been implemented in the Swedish operations to reduce future costs. The work with cost efficiency measures in Denmark is according to plan. Combined ratio for 2010 was 102.0 per cent, compared with 93.6 in 2009. The underwriting result was a loss of nok 77.4 million in 2010, compared with a profit of nok 152.9 million in the previous year. Baltic Gjensidige s Baltic operations sell general insurance products to the private and commercial markets in Latvia, Lithuania and Estonia. Earned premiums, net of reinsurance came to nok 459.3 million in 2010, a decrease from nok 663.4 million the previous year. Earned premiums in 2010 were mainly affected by a rapid decline in the premium volume in the insurance markets in the Baltic. Claims incurred, net of reinsurance came to nok 305.3 million in 2010, compared with nok 411.5 million in 2009. The loss ratio came to 66.5 in 2010, compared with 62.0 in the previous year. There were no large losses in the Baltic operations in 2010 or 2009. So far, the effects of the financial crisis resulted in a reduced number of claims and a drop in the price of repair costs, which has resulted in run-off gains in both 2010 and 2009. The run-off gain in 2010 was somewhat higher than the run-off gain in 2009. The cost ratio was 29.8 for 2010, a decrease of 2.1 percentage points relative to the previous year. Nominal expenses decreased by nok 74.8 million in 2010 relative to 2009, equivalent to 35.4 per cent. During 2009 and 2010, a number of cost-cutting measures were implemented, and this, together with the lower volume of business, helped reduce operating expenses. Gjensidige Baltic has one of the best cost ratios in the Baltic market. Gross premiums written amounted to nok 2,296.7 million in 2010. nok 980.3 million of this amount were premiums written and nok 1,316.4 million were transferred funds. Gjensidige has experienced good growth in the customer portfolio during all of 2010, especially for group defined-contribution pensions, which will contribute to continued growth in premium volumes in the future. In 2009, gross premiums written amounted to nok 2,077.3 million. Earned premiums, net of reinsurance, totalled nok 335.8 million in 2010, compared with nok 116.3 million in 2009. The management income in the savings operations came to nok 22.4 million in 2010, compared with nok 11.2 million in 2009. The increase in revenues is attributed to increased sales and growth in the savings portfolio. The profit margin for savings was 0.61 per cent in 2010, compared with 0.90 per cent in 2009. The reduction is attributed to total assets growing more rapidly than income as a result of increased sales with lower margins to institutional customers. For the paid-up policy portfolio, realised profit in addition to guaranteed interest and provisions for additional capital was divided between the owner and the customers in a ratio of 20/80. The owner s portion of the profit-sharing in 2010 came to nok 9.9 million. Other financial income is the return on equity. Claims incurred totalled nok 258.1 million in 2010 and nok 121.5 million in 2009. In 2010, nok 0.4 million were allocated to the risk equalisation fund, whereas the equivalent figure for 2009 was nok 2.0 million. NOK 11.0 million was allocated to additional provisions for the paid-up policy portfolio in 2010, equivalent to 15.0 per cent of the realised return in addition to guaranteed interest (3.6 per cent on the average). nok 13.2 million was allocated to additional provisions in 2009, equivalent to 50 per cent of the realised return in addition to guaranteed interest (3.7 per cent on the average). The additional provision totalled nok 29.5 million at year-end, whereas the securities adjustment reserve amounted to nok 7.4 million. perspektiv results Combined ratio for 2010 was 96.2 per cent, compared with 93.9 in 2009. The loss and cost ratios were still among the best in the industry in the Baltic. Underwriting profit came to nok 17.4 million in 2010, compared with nok 40.5 million the previous year. Pension and savings Gjensidige offers a broad range of pension, investment and savings products to the private and commercial markets. The pension products include occupational pension insurance, individual pension savings, disability pensions and the management of paid-up policies. The Vekter Funds make up the core of the savings products. Total operating expenses amounted to nok 156.7 million in 2010, nok 109.6 million of which were insurance-related expenses. The corresponding figures for 2009 were nok 179.0 million and nok 102.7 million respectively. The cost increase in 2010 was mainly attributed to portfolio-related costs within the pension area as a result of increased business volume. The profit/(loss) before tax expense was a loss of nok 27.9 million in 2010, compared with a loss before tax of nok 107.8 million in 2009. As operations are still in a development phase, these results were as expected. It is expected that the business area will achieve a profit before tax in 2011.

70 gjensidige annual report 2010 Tor Øwre Board member Øwre was elected member of Gjensidige s Board of Directors in 2003. Mr. has extensive experience in management, sales, systems development and programming, including serving as senior manager at IBM. He was a board member of Polarporten as from 2005 to 2007. Mr. Øwre holds a degree in Business Economy from the Norwegian School of Management (BI) and the North Norwegian Management Foundation. Øwre has been present at 18 board meetings. Total assets Total assets increased by nok 1,767.3 million during 2010 and amounted to nok 12,371.3 million at year-end. Assets under management in the savings operations amounted to nok 5,697.2 million. Assets under management in the pension operations amounted to nok 6,674.1 million, of which the collective portfolio amounted to nok 2,146.0 million. Online retail banking Gjensidige Bank is a bank aimed at customers in the private and agricultural markets in Norway. The bank offers day-to-day banking services, secured loans and consumer finance. Net interest and credit commission income amounted to nok 407.0 million in 2010, compared with nok 57.5 million in 2009. The increase is attributed to an increased volume, higher margins and higher interest rates. The net interest income relative to average total assets was 2.88 per cent in 2010, compared with 0.63 per cent in the previous year. Operating expenses amounted to nok 302.1 million in 2010, compared with nok 147.2 million in 2009. The cost increase is mainly attributed to a higher cost base as a result of the consumer loan portfolio that was acquired in December 2009. Losses on loans/guarantees amounted to nok 109.4 million in 2010, compared with nok 3.0 million in 2009. Total impairment losses on loans in 2010 amounts to nok 117.1 million compared to nok 15.3 million in 2009. Impairment losses on loans have increased due to the acquisition of the consumer loan portfolio. The loss situation is in accordance with the expectations and is normal for the consumer loan portfolio. The profit before tax expense was a profit of nok 33.1 million in 2010, compared with a loss of nok 76.3 million in 2009. The improvement in earnings is mainly due to the acquisition of the consumer loan portfolio the autumn 2009. Deposit-to-loan ratio The deposit-to-loan ratio at year-end 2010 was 64.6 per cent, which was considered satisfactory. At year-end 2009, the deposit-to-loan ratio was 56.6 per cent. A new high-interest product has been well-received by the customers and has helped boost the increase in deposits in 2010. Capital adequacy The capital adequacy was 16.1 per cent at year-end 2010, compared with 17.8 per cent at the end of the previous year. The bank s objective is to have a capital adequacy of at least 12 per cent. Health-related services Under the brand Hjelp24, Gjensidige is a leading player in private health services in Norway. It offers corporate health services, personal security alarm services, private hospital and specialist services and working environment surveys. The services are provided to private customers, businesses and the public sector. Health-related services had operating income of nok 544.7 million in 2010, compared with nok 509.1 million in 2009. The increase in operating income in 2010 was mainly a result of acquisitions carried out in 2010. The organic development was nearly flat, which is attributed to tough price competition related to public tenders. This has resulted in lower prices and margins on renegotiated contracts, but also the loss of individual government contracts, where the price reduction was too great for it to be feasible to offer services under the new terms. Operating expenses amounted to nok 517.3 million in 2010, compared with nok 476.5 million in 2009. Part of this increase is attributed to acquired companies. Cost measures have been implemented in 2010 as a result of the loss of some government contracts. The cost measures will first take full effect starting in the first quarter of 2011. EBita for 2010 came to nok 27.3 million, compared with nok 32.7 million in 2009. This yielded an EBita margin for 2010 of 5.0 per cent, compared with 6.4 per cent in 2009. The decline in the margin was mainly attributed to the loss of government contracts, where it takes some time to adapt the costs to the new level of income. Risk factors Risk is defined as the possibility that an event can affect the Group s achievement of its objectives. Thus, in order to understand and manage risk, we assess both the probability that the event will occur and the consequences of that event. Through the Group s risk management and internal control, a structure is established that identifies, assesses, calls attention to and manages risk throughout the whole Group in a systematic way. The risk assessment process is integrated in the Group s plan and business processes. Risk management is based on specified objectives and strategies and on the limits for risk exposure that have been specified by the Board of Directors. The primary responsibility for good risk management and internal control is vested in the group Ceo and all managers and employees in the operational units, who do the work in keeping with the authorisations, rules of procedure and guidelines that are incumbent on each individual. A risk management function has been established at the group level, which is responsible for monitoring the Group s system for risk management and which

gjensidige annual report 2010 71 should have an overview of the risks to which the Group is or can be exposed. The risk management function shall ensure that the group management and the Board of Directors are sufficiently informed about the Group s risk profile at all times. A compliance function and internal audit are established that both are parts of the supervising of the Group s risk management and internal control. The Group has a moderate risk profile, and in the opinion of the Board of Directors no single event could seriously damage the Company s financial position. Strategic risk Gjensidige s strategy, viewed in the light of results, fluctuations in markets and competition and changes in the regulatory framework, is monitored on a continuous basis. Factors that have been identified as critical to the Company s capacity to achieve its targets are subjected to special monitoring. To ensure that Gjensidige remains at the forefront of all developments in insurance, the Group manages strategic risk by means of continuous monitoring of competitors and the market, product development and planning processes. Gjensidige is facing challenges in the insurance market from both traditional Norwegian financial institutions, which are concentrating to a greater extent on the sale of general insurance, and from new market players. Loss of business combined with diminished profitability in insurance will impact negatively on the Company s return on equity and other key figures. Therefore, it is considered important that Gjensidige be able to rapidly adapt to the consumers desires for service in new channels and efficiently employ modern technology and support systems. The Group is continuously seeking to develop new, customer-adapted products and service solutions, while reviewing and standardising organisation, processes and value chains in order to reduce costs and increase efficiency. Customers are increasingly demanding more expertise on the part of the employees. There is a risk of insufficient or outdated expertise reducing the chances of realising commercial and strategic aims. There is also competition to attract and hold on to capable employees. Hence, we are actively focusing our efforts on competence building at all levels of the organisation, and competency requirements for various roles have been specified. As previously mentioned, Gjensidige has concentrated all training of salespersons, claims handlers and managers in the Gjensidige Academy. This gives both an efficient utilisation of the training resources and increased attention to the question of what is best practice in Gjensidige. Performance-based reward models have been introduced for groups of employees, and individual personal scorecards have been introduced. A focused effort is being made to further develop corporate culture and management and to firmly establish requirements and expectations for managers and employees. Insurance risk The insurance risk related to major individual losses or events is managed via the authorisations and lines of reporting for ordinary operations. Clear guidelines have been established for the type of insurance available. The risk that the general premium level is not adequate is monitored regularly in the product and actuary department, and better methods are being developed to set correct prices. The Board of Directors establishes annual limits for the Group s reinsurance programme. These limits are based on the need to protect equity against claims that exceed a justifiable amount and the need to reduce fluctuations in earnings. Insurance risk is deemed to be moderate with the reinsurance cover the Group has in place. The reinsurance programme is described in greater detail in note 3 of the consolidated annual accounts. The Group s actuarial function makes calculations and assessments of the actuarial provisions, including the development and maintenance of adequate models and methods of estimating losses that have occurred, but not yet been reported to the Group. There is a significant inherent risk that the provisions are not sufficient, but the Group is working continuously to improve the actuarial methods and employs external actuaries at times for independent reviews of the provisions. Financial risk Gjensidige had financial investments worth nok 52.3 billion (insurance operations) as per 31 December 2010. These consist mainly of interest-bearing investments, property, equities and strategic and financial holdings in associated companies, and they are exposed to changes in macroeconomic factors. The strategic allocation of assets and dynamic risk management model established by the Board of Directors provide the necessary framework for rapid adaptation of risk to changes in macroeconomic conditions. The monitoring of price, interest rate and foreign currency risk is partly conducted through stress tests, where the buffer capital must remain at a sufficient level to withstand significant simultaneous drops in share prices and bond prices at any given time. For further information on interest rate risk and stress tests, cf. note 3 in the consolidated annual accounts. Limits have been determined for the necessary access to liquid funds. These limits are taken into account when determining the strategic allocation of assets. The liquidity risk is regarded as very low. The Group is exposed to credit risk through investments in the bond and money markets and through its lending activities. The Board of Directors has set limits for credit activities. Credit losses have been immaterial to date. Outstanding claims against the Group s reinsurers may also represent a substantial credit risk. Counterparty risk in the perspektiv results

72 gjensidige annual report 2010 reinsurance market is subject to continuous assessment. All reinsurers for the Group must have at least a Standard & Poor s A- rating or its equivalent from one of the other reputable rating companies. The Board of Directors has assessed the risk of losses on loans, guarantees and other receivables, and the necessary provisions have been made in the accounts. Operational risk Operational risk is the risk of loss due to weaknesses or errors in processes and systems, errors committed by employees, or external events. To reduce this risk, the Group focuses on organising its operations with clear, well-defined lines of reporting and responsibility. Fixed procedures have been established for the execution of risk assessment, and the Board of Directors considers the annual status in the established internal control system. An independent compliance function was established that should help ensure that the Group does not incur government sanctions, financial losses or damage to its reputation as a result of non-compliance with laws, rules and standards. The compliance function identifies, assesses, gives advice on, monitors and reports the Group s compliance risk. Ethical issues are discussed in management groups and in employee meetings. This should reduce the risk of breaches of procedures and guidelines while helping to create a good working environment. Employees have also signed a separate computer acceptable use policy related to the use of the Group s information and it systems. On behalf of the Board of Directors, Gjensidige s internal auditing function monitors and assesses the extent to which risk management and internal controls meet expectations. For a further description of the Company s risk management, cf. note 3 in the consolidated annual accounts and a separate chapter on pages www. gjensidige.com. CORPORATE governance Good corporate governance is a priority for the Board of Directors. The Board of Directors has decided to base the Group s corporate governance on the Norwegian Code of Practice for Corporate Governance dated 21 October 2010 and has adapted the Code of Practice in all areas. An explanatory account of how Gjensidige meets the Code of Practice is provided in a separate document that is included in the Annual Report and that is available on the Group s website, www.gjensidige.com. SOCIAL responsibility AND EXterNal ENviroNMENT Gjensidige s mission in society is to create value for the society by safeguarding life, health and assets and relieving customers of risk. Therefore, Gjensidige shall exercise social responsibility in particular by ensuring that the expertise that the Group possesses in the prevention of damage shall benefit the whole society. Ethical, social and environmental considerations have been integrated into the daily operations and influence relations with the Group s interested parties. The Board of Directors regards the practicing of socially responsible activities and high ethical standards as necessary conditions for gaining the trust of the world at large and achieving commercial success in the long run. The Board of Directors has established guidelines that specify targets and limits for the Company s socially responsible involvement. The guidelines are available at www.gjensidige.com. Selected quantitative goals have been set for socially responsible operations with regard to customers, suppliers, employees and the environment. The Group s operations result in minimal pollution of the environment. The Group s environmental measures focus on energy economising, reducing travel through increased use of video conferencing, standardised printers and copiers that print on both sides of the paper, and responsible waste management. To reduce paper consumption and achieve environmental benefits, an effort is also being made to implement measures to increase the use of electronic insurance documents. Gjensidige s head office at Sollerud was already certified as an Environmental Lighthouse in 2008, and in 2009 and 2010 several other offices have been awarded the same status. The efforts to certify the Group s offices will be completed in the spring of 2011. At that time, all of our offices with over 30 employees will be certified as Environmental Lighthouses. Gjensidige is working continuously to acquire knowledge about climate change and the consequences that it may entail. The purchase of carbon offsets has been one of the measures taken in the Company s environmental efforts. The Board of Directors is not aware of any products containing PCBs in Gjensidige s buildings and real estate. Targets and the achievement of goals, plus a more detailed description of Gjensidige s efforts related to social responsibility are presented in tables and descriptions on pages 38 to 41 of the Annual Report.

gjensidige annual report 2010 73 HUMAN resources Demographics and equal opportunity At year-end 2010, the Group had a total of 3,917 employees. In the Norwegian general insurance operations, there were 2,041 employees as per 31 December 2010. The gender distribution in Gjensidige Forsikring was 54.4 per cent men and 45.6 per cent women at year-end 2010. The percentage of men increased somewhat relative to 2009 (53.7 per cent men). In 2010, 225 new employees were hired in addition to employees in acquired businesses. Among the new employees, 125 were men and 100 were women, with an average age of 33.3. During the same period, 236 employees (120 women and 116 men, average age 44.5) left the Company, which gives a staff turnover rate of 11.6 per cent. Staff level gjensidige Norge gjensidige Group 2010 2,041 3,917 2009 2,055 3,780 2008 2,060 3,640 2007 2,033 3,460 2006 2,242 3,497 2005 2,272 2,611 The average age in the parent company was 44.4 (44.6 in 2009), and the average seniority was 12.2 years (12.4 in 2009). Cooperation with the employees and the Finance Sector Union of Norway has been good. The Cooperation and Working Environment Committee has convened regularly. The Board of Directors considers the in-house working environment to be good. At year-end 2010, there were two women among the nine members of the group management. At year-end 2009, there were no women in the group management. On the Board of Directors, the percentage of women was 40 at year-end 2010 (4 out of 10), compared with 33 per cent (4 out of 12) in 2009. Among the representatives who were not elected by employees, the percentage of women was 43 per cent (3 out of 7). Out of a total of 217 managers, 35.0 per cent were women, which is a slight decline from 2009 (35.8 per cent female managers). The questions are based on a Nordic standard, and comparison figures are utilised for Norway. The whole Group participated, and the Board of Directors is satisfied with the high participation with a total response percentage of over 90. The employee satisfaction survey shows that the employees score higher for the most part than the reference group. The employees are generally quite satisfied with the management, and the social environment is assessed to be very good. The work intensity is perceived to be higher in Gjensidige than the average for other companies in equivalent surveys. The ongoing work on the findings from the survey involves both managers and employees, and action plans have been set up with binding delivery dates for all areas and departments. The Gjensidige Academy and skills development The Gjensidige Academy was established in 2010. All of Gjensidige s efforts in management and employee development are concentrated in the Academy. The Academy s tasks are closely related to the Group s strategy, and measures that are established shall support the Group s capability of rapid restructuring and development. There has been a considerable increase in in-house training activity, and the number of course-days in 2010 came to over 6,200 (3,231 in 2009). This increase is mainly attributed to the activity at Gjensidige s Customer and Brand School, where new salespersons in both the Private and Commercial areas have attended along with existing salespersons and claims handlers. The curriculum has focused on vocational, systems and communications topics, and both new and existing salespersons have taken the certification test that Finance Norway (Fno) requires of everyone who sells insurance in the Private market. All in all, Gjensidige now has over 700 certified salespersons in the Private area, and the theoretical and practical certification of existing salespersons gave us a substantial boost in 2010. For many years, e-learning has been an important learning channel for Gjensidige, and there was a substantial development in this area in 2010. Several compulsory courses have been developed relating to ethics, money laundering and procedures and rules related to stock-exchange listing. In addition, e-learning is employed as a basis for much of the vocational and product training at Gjensidige s Customer and Brand School and for the training of salespersons in connection with marketing campaigns. perspektiv results Employee satisfaction Gjensidige conducts an employee satisfaction survey (ess) annually. This survey gives good indications of the factors that are essential to the working environment and well-being and also provides a good basis for all employees to get involved in the processes related to those factors. Gjensidige has launched minute courses, which are simple courses that only take a couple of minutes to complete and that deal with topics where professionals see that the employee can improve with a little simple training. Over 20 courses have been developed, and the attendance has been good. In addition, the learning portal that is employed for training for marketing campaigns has

74 gjensidige annual report 2010 undergone an increase in use. It is required that all of the employees should have gone through this training before the marketing activities commence. On the whole for all types of e-learning, there were about 16,900 passed courses in the parent company in 2010, compared with 8,510 courses passed in 2009. In addition, courses have been provided to the subsidiaries, which had more than 700 passed courses in 2010. Management development plays an important role in helping to ensure a modifiable and highly competitive firm, and it shall be closely associated with the business s needs and perceived as useful and easy to put into practical use. Correct skills development and good management shall be one of Gjensidige s most important competitive advantages. In 2010, the management programme Leading Culture has been the organisation s most important implementation tool for the above-mentioned GjensidigeExperience. All managers in the Group have completed the programme, followed up by training in work processes in the various departments where the employees have participated. In 2011, further efforts will be made in the development of the Gjensidige Academy, including new management and employee programmes that will include the whole Group. In collaboration with the Norwegian School of Management, Gjensidige Forsikring has evaluated the employees perception of Gjensidige s educational and training measures. The results show that the education and training that have been initiated have had a significant effect on the quality of the work and the job effort, inner motivation and increased well-being. Systematic Health, Safety and Environment (hse) Systematic Health, Safety and Environment work is well-integrated in the organisation. A continuous focus on topics such as follow-up of absence due to illness with all follow-up in writing, development and integration of new systems and further development of electronic manuals helps reduce the absence due to illness. The cooperation with the corporate health services and the Norwegian Labour and Welfare Administration (nav) has been further improved during 2010. As with previous years, 2010 has been distinguished by a rapid pace of work, restructuring and reorganisation, and HR/Hse have been well-integrated into these processes. Internal Hse audits were conducted in the autumn of 2010 in the centres. After this audit, the conclusion was that quality-assured and systematic Hse efforts were being conducted at all levels. Working Environment and Hse committees have held regular meetings. At year-end 2010, the average absence with doctor s certificate due to illness in the Norwegian operations was 5.2 per cent, compared with 5.0 per cent in 2009. The absence with doctor s certificate due to illness for the Group in 2010 was 4.4 per cent. The Company stands by its objective of an absence due to illness of 4 per cent. There were no significant injuries or accidents in 2010. Diversity and discrimination In 2010, Gjensidige continued to pursue all three of the sub-goals in the Inclusive Working Life (ia) Agreement, and integration and diversity are deeply rooted in the organisational culture. There is a balanced gender composition in the group, with 54.4 per cent men and 45.6 per cent women. The management team is composed of 65 per cent men and 35 per cent women. With regard to equal opportunity and inclusive workforce, there are efforts to ensure that all employees are given the same opportunities for personal and professional development and will be treated equally regardless of gender, age, ethnic origin and functionality. Hiring and Hse routines shall ensure that the Anti-discrimination and Accessibility Act is complied with. Pay statistics are being drawn up in order to call attention to any pay disparities on the basis of gender, age, ethnic origin or impaired functionality for the same work or work of equivalent value, and measures are implemented to equalise any disparities that may be found. Gjensidige cooperates with the Norwegian Labour and Welfare Administration (nav) on job training and pay supplements for people who have been unemployed, and the Group has had several employees in job training programmes through these schemes. Senior policy Gjensidige has an active senior policy that aims to get as many employees as possible to work until they turn 67. An important measure for seniors has been the opportunity to work in a 90 per cent position with full salary or in an 80 per cent position with 90 per cent salary. This scheme is under evaluation, among other things in light of the pension reform. Those who so desire are entitled to flexible working hours and other arrangements. Gjensidige also has an occupational pension scheme and insurance schemes that are among the best in Norway. Together with these measures, the age limit constitutes a comprehensive package.

gjensidige annual report 2010 75 Since 1972, Gjensidige has had an upper age limit of 67 for its employees. In the autumn of 2009, the Company was sued by an employee who wanted to remain in his position after turning 67. Oslo District Court found in favour of the employee when they heard the case in April 2010, but the Company appealed. In December, the Borgarting Court of Appeal handed down a judgment in Gjensidige s favour. The case has been appealed to the Supreme Court, and the employee will remain in his position until the judgment is final and conclusive. The question of an age limit is an important matter of principle for Gjensidige and for much of the rest of the Norwegian labour market, and it involves the possibility of having a certain amount of predictability in connection with agreements, pension matters and workforce management. The Norwegian Employers Association for the Financial Sector (FA) has declared third-party intervention in support of Gjensidige and has helped the Company with legal assistance during the hearing. In addition, the Norwegian Confederation of Trade Unions (lo) and the Confederation of Norwegian Enterprise (NHO) have gotten involved and inquired jointly with the Ministry of Labour for a clarification with regard to company-determined age limits. The issue became relevant when the rules concerning coordination of pension and income from employment for the age group between 67 and 70 were gradually amended starting in 2008. This is also an issue related to the introduction of a new pension reform. Gjensidige awarded hr Norway s Competence Award In 2010, Gjensidige Forsikring was awarded the Competence Award for that year from HR Norway on the strength of the Company s long-term comprehensive and systematic efforts at skills development. This is an award that is given out annually to a firm, organisation or individual that has achieved particularly good results in the area of personal and organisational development in the past year. In the grounds for giving the award to Gjensidige, it is specified that the efforts at skills development in Gjensidige Forsikring are distinguished by systematic procedures and continuity. Different efforts are considered in context and help support each other. The result is a good comprehensive package that ensures that the employees will develop their skills in step with the market s requirements and the Company s needs. OUTLOOK The competition in the Norwegian general insurance market became even tougher in 2010, and this trend is expected to continue. The small insurance companies have gradually increased their market shares, partly by establishing themselves in niches in the market and partly through aggressive pricing. In addition, many of the established financial institutions have started general insurance companies. These companies have not previously provided general insurance, but have associated operations and distribution channels. However, the measures that were implemented in 2009 and 2010 entail that Gjensidige is well positioned to meet this competition. Nevertheless, growth in the premium volume in Gjensidige s Norwegian general insurance operations in 2011 is mainly expected to come from implemented and planned premium measures. It is expected that it will mainly be the Danish and Swedish general insurance operations that will contribute to growth in 2011. The economic outlook for the Baltic States is still negative, and a further decline is expected in the total market for general insurance. In Lithuania, however, the trend is more positive. The established pension, savings and banking operations have developed in keeping with our expectations, and they will strengthen the Group s position and foundation for growth in Norway in the long run. Gjensidige Bank has achieved a volume that should make it possible to operate profitably in the coming years. A further objective is that the pensions and savings operations shall achieve break-even in 2011. The stock exchange listing has given the Group greater freedom of action and opportunities to participate in the structural changes that affect the financial industry in the Nordic region. Through the listing, the Group has been able to establish a security that can be used for possible acquisitions or finance the strategy for growth in the Group s range of products and geographical range in some other way, in addition to placing a value on Gjensidige. A change in the regulatory framework in general may affect Gjensidige s operations. No new regulatory framework has been passed in 2010 that will have a major impact on the operations, but there are a number of initiatives that will have an impact over a period of time. This is especially true of the eu s solvency project for insurance companies, Solvency ii. The Solvency ii project is in progress under the direction of the eu, and this project will result in a completely new standard for capital adequacy and the regulation of European insurance companies. Solvency ii will help improve the quantification of risk and capital requirements for insurance companies, and it will strengthen risk management in general. The new regulations, which are expected to enter into force at the beginning of 2013, will give companies a greater incentive to survey and manage all risks in a consistent manner. Gjensidige is actively following these developments, and they have participated, for example, in the quantitative impact studies. The conclusion from the preliminary study is that Gjensidige is well positioned to meet the new requirements. Solvency ii will also entail new requirements for the way in which risk management in the business is organised and performed as well as new reporting requirements. In connection with updating the group s strategy, the Board of Directors has requested that the management assess whether the health-related services perspektiv results

76 gjensidige annual report 2010 segment should remain a wholly-owned part of the Group s broad-based activities in Norway. A conclusion is expected in the second half of May 2011. As part of the strategic update, the Board of Directors has also defined a goal that the general insurance operations shall achieve a cost ratio of 15 by 2015. Various measures shall be implemented to achieve this target, the most important of which are related to automation and the improvement of self-service solutions, the relocation of functions and the simplification of the product structure. Gjensidige has substantial capital buffers, with regard to both internal risk models and statutory capital adequacy requirements. The Board of Directors considers the Group s capital situation and financial strength to be good. Normally there is a great deal of uncertainty regarding forward-looking matters, but in the Board s opinion the Group is well-equipped to meet the competition in the years to come. EVENts after the BalaNce sheet date No significant events have occurred after year-end 2010. ALLOCATION of profit Before other components of comprehensive INcoME The Group s profit for the year after tax amounted to nok 2,950.4 million. The Board of Directors has approved a dividend policy that forms the basis for the dividend proposals that are submitted to the general meeting. Gjensidige shall have a competitive dividend policy relative to comparable investments. In determining the size of the annual dividend, consideration shall be given to the Group s capital requirements, including capital adequacy requirements, together with targets and strategic plans. Unless the capital requirements suggest otherwise, the Board of Directors goal is that between 50 and 80 per cent of the profit for the year after tax will be distributed as dividends. The Board of Directors recommends that nok 2,350 million be paid in dividends for the 2010 financial year, equivalent to 80.0 per cent of the Group s profit for the year. It is recommended that the parent company s profit before other components of comprehensive income of nok 2,590.2 million be allocated as follows: Dividends 2,350.0 Transferred to restricted funds 249.3 Transfer from other unrestricted reserves (9.1) Allocated 2,590.2 Other components of comprehensive income that are presented in the income statement are not included in the allocation of profit. After the allocation of profit before other components of comprehensive income, the parent company s unrestricted reserves amount to nok 13,302.5 million. The Board of Directors would like to thank the employees for their efforts and their contribution to the Company s profit in 2010. The Board of Directors has decided to give each employee a bonus of nok 10,000. 17 March 2011 The Board of Directors of Gjensidige Forsikring asa Inge K. Hansen randi B. Sætershagen Gunnhild H. Andersen trond Vegard Andersen Hans-Erik F. Andersson Chairman of the Board Kjetil Kristensen gisele Marchand gunnar Mjåtvedt Mari T. Skjærstad tor Øwre Helge Leiro Baastad Group Ceo

gjensidige annual report 2010 77 financial statements and notes 2010 gjensidige insurance group Page Consolidated income statement... 78 Consolidated statement of comprehensive income... 79 Consolidated statement of financial position... 80 Consolidated statement of changes in equity... 81 Consolidated statement of cash flows... 82 Accounting policies... 83 Gjensidige Forsikring asa Page Income statement...148 Balance sheet...150 Statement of changes in equity...152 Statement of cash flows...153 Accounting policies...154 perspektiv results Notes 1 equity...90 2 use of estimates...91 3 Management of insurance and financial risk...92 4 segment information... 112 5 intangible assets... 114 6 shares in associates... 117 7 owner-occupied property, plant and equipment... 118 8 investestment property... 119 9 Financial asset and liabilities... 120 10 Financial derivatives and hedge fund... 123 11 loans and receivables... 125 12 Cash and cash equivalents... 126 13 shares and similar interests... 126 14 insurance-related liabilities and reinsurers share... 128 15 pension... 130 16 provisions and other liabilities... 133 17 tax... 133 18 expenses... 135 19 salaries and remuneration... 136 20 net income from investments... 140 21 Contingent liabilities... 141 22 related party transactions... 141 23 events after the balance sheet date... 144 24 Capital ratio... 144 25 solvency margin... 145 26 restricted funds... 145 27 shareholders... 145 28 share-based payment... 146 29 earnings per share... 146 30 acquisition of Nykredit... 147 Notes 1 equity... 160 2 use of estimates... 161 3 Management of insurance and financial risk... 161 4 premiums and claims etc. in general insurance... 162 5 intangible assets... 164 6 shares in subsidiaries and associates... 166 7 owner-occupied property, plant and equipment... 168 8 investestment property... 169 9 Financial asset and liabilities... 170 10 Financial derivatives... 173 11 loans and receivables... 174 12 Cash and cash equivalents... 174 13 shares and similar interests... 175 14 insurance-related liabilities and reinsurers share... 177 15 pension... 178 16 provisions and other liabilities... 181 17 tax... 181 18 expenses... 183 19 salaries and remuneration... 184 20 net income from investments... 188 21 Contingent liabilities... 189 22 related party transactions... 189 23 events after the balance sheet date... 192 24 Capital ratio... 192 25 solvency margin... 193 26 restricted funds... 193 27 shareholders... 193 28 share-based payment... 194 Declaration from the Board of Directors and the Ceo... 195 Auditor s report... 196 Statement by the Control committee... 198 Statement by the Supervisory board... 199

78 gjensidige annual report 2010 consolidated income statement Nok million Notes 1.1.-31.12.2010 1.1.-31.12.2009 Operating income Earned premiums from general insurance 17,063.3 15,660.4 Earned premiums from pension 335.8 116.3 Interest and credit commission income from banking operations 782.6 323.3 Operating income from health care services 544.7 509.1 Other income 64.4 61.5 Total operating income 4 18,790.8 16,670.7 Net income from investments Income from investments in associates 6 488.7 263.3 Operating income from property 422.8 401.2 Interest income and dividend etc. from financial assets 1,385.4 1,385.9 Net changes in fair value on investments (incl. property) 262.3 773.3 Net realised gain and loss on investments 331.4 120.1 Expenses related to investments 18 (142.4) (155.9) Total net income from investments 20 2,748.2 2,788.0 Total operating income and net income from investments 21,539.0 19,458.7 Claims, loss etc. Claims incurred etc. from general insurance (13,456.6) (12,071.0) Claims incurred etc. from pension (258.1) (121.5) Interest expenses etc. and loss on loans/quarantees from banking operations (484.9) (268.8) Total claims, interest expenses, loss etc. (14,199.6) (12,461.4) Operating expenses Operating expenses from general insurance (2,810.4) (2,771.5) Operating expenses from pension (109.6) (102.7) Operating expenses from banking operation (302.1) (147.3) Operating expenses from health care services (517.3) (476.5) Other operating expenses (91.5) (116.1) Amortisation and impairment losses of excess value - intangible assets (254.3) (216.7) Total operating expenses 18 (4,085.3) (3,830.8) Total expenses (18,285.0) (16,292.1) Profit/(loss) for the year before tax expense 4 3,254.0 3,166.5 Tax expense 17 (303.6) (861.8) profit/(loss) for the Year 2,950.4 2,304.8 Earnings per share, Nok (basic and diluted) (restated for 2009) 29 5,90 4,61

gjensidige annual report 2010 79 CONsolidated statement of comprehensive INcoME Nok million 1.1.-31.12.2010 1.1.-31.12.2009 Profit/(loss) for the year 2,950.4 2,304.8 Components of other comprehensive income Exchange differences (19.4) (102.5) Share of other comprehensive income of associates 17.6 (8.6) Actuarial gains and losses on pension (118.0) 442.7 Tax on other comprehensive income (28.5) (254.1) Total components of other comprehensive income (148.4) 77.5 total comprehensive INcoME for the Year 2,802.0 2,382.3 perspektiv results

80 gjensidige annual report 2010 CONsolidated statement of financial position Restated 1 NOK million Notes 31.12.2010 31.12.2009 assets Goodwill 5 2,580.7 1,507.5 Other intangible assets 5 1,349.5 847.1 Deferred tax assets 17 199.4 Investments in associates 6 4,275.5 3,783.3 Owner-occupied property 7 318.5 282.2 Plant and equipment 7 345.1 316.1 Investment properties 8 5,900.3 5,509.9 Financial assets Financial derivatives 9, 10 536.6 203.2 Shares and similar interests 9, 13 4,282.9 7,728.6 Bonds and other securities with fixed income 9 18,389.9 15,562.4 Bonds held to maturity 9 14,497.5 15,816.0 Loans and other receivables 9, 11 19,537.8 13,349.5 Assets in life insurance with investment options 11 4,503.6 2,823.4 Reinsurance deposits 0.6 0.6 Reinsurers' share of insurance-related liabilities in general insurance, gross 14 487.0 239.3 Receivables related to direct operations and reinsurance 11 3,585.1 3,435.8 Other receivables 11 342.2 303.5 Prepaid expenses and earned, not received income 11 84.5 56.9 Cash and cash equivalents 12, 26 2,889.9 3,103.5 total ASSETS 84,106.8 74,868.9 EQUITY AND LIABILITIES Equity Share capital 1,000.0 1,000.0 Premium reserve 1,430.0 1,430.0 Other equity 20,707.8 19,538.2 Total equity 23,137.8 21,968.2 Provision for liabilities Provision for unearned premiums, gross 14 9,078.3 7,671.7 Claims provision, gross 14 28,339.3 25,857.2 Other insurance-related provisions 14 119.0 69.7 Pension liabilities 15 705.3 774.4 Other provisions 16 138.5 144.0 Financial liabilities Financial derivatives 9, 10 155.3 93.1 Deposits from and liabilities to customers 9, 16 9,120.0 6,550.4 Interest-bearing liabilities 9, 16 5,254.9 4,916.1 Other liabilities 9, 16 1,234.4 1,245.9 Current tax 17 442.7 921.7 Deferred tax liabilities 17 1,274.6 1,205.6 Liabilities related to direct insurance 9, 16 392.5 346.4 Accrued dividend 74.8 Liabilities in life insurance with investment options 16 4,503.6 2,823.4 Accrued expenses and deferred income 9, 16 210.7 206.3 Total liabilities 60,969.1 52,900.7 total EQUITY AND LIABILITIES 84,106.8 74,868.9 1 the company is converted from limited liability mutual company (BA) to public limited company (asa). In that connection the comparable figures under equity are changed. There is no change in total equity. Restatement of the comparable figures are presented in consolidated statement of changes in equity. 17. mars 2011, Styret i Gjensidige Forsikring asa Inge K. Hansen randi B. Sætershagen Gunnhild H. Andersen trond Vegard Andersen Hans-Erik F. Andersson Kjetil Kristensen Chairman Gisele Marchand gunnar Mjåtvedt Mari T. Skjærstad tor Øwre Helge Leiro Baastad Ceo

gjensidige annual report 2010 81 CONsolidated statement of changes IN EQuitY Equity Equali- Total Total certificate sation Other class I class ii Total Nok million capital fund equity capital capital equity Equity as at 31.12.2008 restated 3,860.0 123.3 913.1 4,896.5 14,689.5 19,585.9 Ownership fraction 25 % 75 % Other Exchange Actuarial Other Share Own Premium paid in differ- gains/los. earned Total Nok million capital shares reserve capital ences pension equity equity Conversion from BA to asa Reclassification from equity certificate capital to share capital, premium reserve and other earned equity 1 1,000.0 1,430.0 1,430.0 3,860.0 Other reclassifications (12.9) (2,448.6) 18,187.4 15,725.9 Restated as at 31.12.2008 1,000.0 1,430.0 (12.9) (2,448.6) 19,617.4 19,585.9 perspektiv results 1 As at 30 September 2009 the equity certificate capital was reduced to nok 1,000.0 million and equally transferred to premium reserve and equalisation fund. In connection with conversion from limited liability mutual company (BA) to public limited liability company (asa) the equity certificate capital is converted to share capital. 1.1.-31.12.2009 Profit/(loss) for the year 2,304.8 2,304.8 Components of other comprehensive income Exchange differences (102.5) (102.5) Share of other comprehensive income of associates (8.6) (8.6) Actuarial gains and losses on pension 442.7 442.7 Tax on other comprehensive income (254.1) (254.1) Total components of other comprehensive income (102.5) 442.7 (262.7) 77.5 Total comprehensive income for the year (102.5) 442.7 2,042.1 2,382.3 Equity as at 31.12.2009 1,000.0 1,430.0 (115.4) (2,005.9) 21,659.6 21,968.2 1.1.-31.12.2010 Profit/(loss) for the year 2,950.4 2,950.4 Components of other comprehensive income Exchange differences (19.4) (19.4) Share of other comprehensive income of associates 17.6 17.6 Actuarial gains and losses on pension (118.0) (118.0) Tax on other comprehensive income (28.5) (28.5) Total components of other comprehensive income (19.4) (118.0) (10.9) (148.4) Total comprehensive income for the year (19.4) (118.0) 2,939.5 2,802.0 Own shares (0.1) (3.1) (3.1) Paid dividend (1,650.0) (1,650.0) Equity-settled share-based payment transactions 7.5 7.5 Tax on items recognised directly in equity 13.2 13.2 Equity as at 31.12.2010 1,000.0 (0.1) 1,430.0 7.5 (134.8) (2,124.0) 22,959.1 23,137.8

82 gjensidige annual report 2010 CONsolidated statement of Cash flows Nok million 1.1.-31.12.2010 1.1.-31.12.2009 Cash flow from operating activities Premiums paid, net of reinsurance 20,023.9 17,565.2 Claims paid, net of reinsurance (12,970.2) (11,061.3) Operating expenses paid, including commission (3,937.0) (3,879.6) Net receipts/payments on lending and borrowing (2,255.9) (4,388.3) Net receipts/payments from investments shares and other equity participations (468.2) (956.2) Bonds and other fixed-income securities 3,929.8 (1,523.9) Financial derivatives and other financial instruments 416.6 (672.0) investment property (128.8) (5.7) Interest and other financial income 149.4 591.2 Net receipts/payments - property activities 40.0 267.9 Net receipts/payments - other income 608.9 549.6 Payments of tax (1,155.2) (401.4) Net cash flow from operating activities 4,253.3 (3,914.5) Cash flow from investing activities Payments on purchase of subsidiaries (2,702.0) Net receipts/payments on sale/purchase of owner-occupied property 0.2 Net receipts/payments on sale/purchase of plant and equipment (214.8) (174.7) Net cash flow from investing activities (2,916.6) (174.7) Cash flow from financing activities Payments of dividend (1,677.6) (3.6) Payment on acquisition of portfolio 42.9 Interest payments on borrowings (208.1) (36.7) Net payment on long term borrowings 218.6 4,328.9 Net cash flow from financing activities (1,624.2) 4,288.6 Net cash flow for the period (287.5) 199.4 Effect of currency fluctuations on cash and cash equivalents 1.7 (110.4) Net movement in cash and cash equivalents (285.8) 89.0 Cash and cash equivalents at the start of the period 3,103.5 3,011.6 Merged, acquired and disposed companies 72.2 2.8 Adjusted holdings at the beginning of the period 3,175.7 3,014.5 Cash and cash equivalents at the end of the period 2,889.9 3,103.5 Net movement in cash and cash equivalents (285.8) 89.0

gjensidige annual report 2010 83 ACCOUNtiNG policies REPORTING ENtitY Gjensidige Forsikring asa is a publicly listed company domiciled in Norway. The company s head office is located at Drammensveien 288, Oslo, Norway. The consolidated financial statements of the Gjensidige Insurance Group (the Group) as at and for the year ended 31 December 2010 comprise Gjensidige Forsikring asa and its subsidiaries and the Group s interests in associates. The activities of the Group consist of general insurance, pension and savings, online retail banking and health care services. The Group does business in Norway, Sweden, Denmark, Latvia, Lithuania and Estonia. Gjensidigestiftelsen has controlling interest of Gjensidige Forsikring asa and is thus obligated to prepare consolidated financial statements. The consolidated financial statements can be obtained by contacting Gjensidigestiftelsen at Drammensveien 288, Oslo, Norway. The accounting policies applied in the consolidated financial statements are described below. The policies are used consistently throughout the entire Group with the exception of one difference that is permitted in accordance with IFrs 4 about insurance contracts. See description under the section Claims provision, gross. Basis of preparation Statement of compliance The consolidated financial statements have been prepared in accordance with IFrss endorsed by eu, and interpretations that should be adopted as of 31 December 2010, and additional disclosure requirements in accordance with the Norwegian Financial Reporting Regulations for Insurance Companies (For 1998-12-16 nr 1241) pursuant to the Norwegian Accounting Act. Changes in accounting policies There are no changes in accounting policies in 2010. The IFrss and interpretations that have been issued up until 17 March 2011, not yet mandatory as at 31 December 2010, i.e. IFrs 9 and IFriC 19, amendments to ias 32, IFriC 14, revised ias 24, as well as improvements to IFrss are assumed, based on assessments made so far, not to have material impact on reported figures. Basis of measurement The consolidated financial statements have been prepared based on the historical cost principle with the following exceptions derivatives are measured at fair value financial instruments at fair value through profit or loss are measured at fair value financial assets available for sale are measured at fair value investment properties are measured at fair value Functional and presentation currency The consolidated financial statements are presented in nok, which is Gjensidige Forsikring s functional currency. All financial information is presented in nok, unless otherwise stated. SEGMENT reporting According to IFrs 8, the operating segments are determined based on the Group s internal organisational management structure and the internal financial reporting structure to the chief operating decision maker. In Gjensidige Insurance Group the Senior Group Management is responsible for evaluating and following up the performance of the segments and is considered the chief operating decision maker within the meaning of IFrs 8. Gjensidige reports on seven operating segments, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. Identification of the segments is based on the existence of segment managers who report directly to the Senior Group Management/Ceo and who are responsible for the performance of the segment under their charge. Based on this Gjensidige reports the following operating segments general insurance Private Norway general insurance Commercial Norway general insurance Nordic general insurance Baltic pension and savings online retail banking Health care services The recognition and measurement principles for Gjensidige s segment reporting are based on the IFrs principles adopted in the consolidated financial statements. Inter-segment pricing is determined on arm s length distance. CONsolidatioN policies Subsidiaries Subsidiaries are entities in which Gjensidige Forsikring has a controlling influence, which will apply to companies where Gjensidige Forsikring owns more than 50 per cent of the voting shares, either directly or indirectly through subsidiaries. The subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of the subsidiaries have been changed when necessary, to align them with the policies adopted by the Group. Associates Associates are entities in which the Group has a significant, but not a controlling, influence over the financial and operating policies. Normally this will apply when the Group has between 20 and 50 per cent of the voting power of another entity. Associates are accounted for using the equity method, and are recognised initially at cost. The Group s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group s share of income, expenses, and movements in equity, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that the significant influence ceases. perspektiv results Due to rounding differences, figures and percentages may not add up to the total. Transactions eliminated on consolidation Intra-group balances and transactions, and unrealised income and expenses arising from intra-group transactions, are eliminated in

84 gjensidige annual report 2010 the consolidated financial statements. Unrealised gains arising from transactions with equity accounted companies are eliminated against the investment to the extent of the Group s interest. Unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment. Business combinations Business combinations are accounted for by applying the purchase method. The cost of the business combination is the fair value at the date of exchange of assets acquired, liabilities incurred and equity instruments issued by the Group, in exchange for control of the acquired company, and any expenses directly attributable to the business combination. If the fair value, after a reassessment of the Group s share in the net fair value of identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess amount is recognised immediately in profit or loss. CASH flow statement Cash flows from operating activities are presented according to the direct method, which gives information about material classes and payments. RECOGNitioN of revenue AND EXpeNses Operating income and operating expenses consist of income and expenses in relation to the business in the different business areas, see below. Earned premiums from general insurance Insurance premiums are recognised over the term of the policy. Earned premiums from general insurance consist of gross premiums written and ceded reinsurance premiums. Gross premiums written include all amounts the company has received or is owed for insurance contracts where the insurance period starts before the end of the accounting period. At the end of the period provisions are recorded, and premiums written that relate to subsequent periods are adjusted for. Ceded reinsurance premiums reduce gross premiums written, and are adjusted for according to the insurance period. Premiums for inward reinsurance are classified as gross premiums written, and are earned according to the insurance period. Earned premiums from pension Earned premiums from pension consist of earned risk premium and administration expenses in relation to the insurance contracts. Interest income and credit commission income from banking operations Interest income and interest expenses are calculated and recognised using the effective interest method. The calculation takes into account arrangement fees and direct marginal transaction costs that form an integral part of the effective interest rate. Interest is recognised in profit or loss using the effective interest method both for balance sheet items that are measured at amortised cost and those that are measured at fair value through profit and loss. Interest income on impaired loans is calculated as the effective interest on the impaired value. Commission income from various customer services is recognised depending on the nature of the commission. Charges are recognised as income when the services have been delivered or when a significant proportion have been completed. Charges that are received for services provided are recognised as income in the period in which the service was performed. Commissions received as payment for various services is recognised as income when the service has been performed. Commission expenses are transaction based, and are recognised in the period in which the service was received. Operating income from health care services The contracts vary between fixed-price contracts which to a great extent are invoiced in advance, and task contracts which are invoiced after completed assignment/time used. The part of the income that is invoiced in advance is accrued over the period the invoice applies to. From operating income, value added tax, discounts, bonuses and invoiced freight expenses are deducted. Claims incurred Claims incurred consist of gross paid claims less reinsurers share, in addition to a change in provision for claims, gross, also less reinsurers share. Direct and indirect claims processing costs are included in claims incurred. The claims incurred contain run-off gains/losses based on previous years claims provisions. Operating expenses Operating expenses consist of salaries and administration and sales costs. Insurance-related operating expenses consist of insurance-related administration expenses including commissions for received reinsurance and sales expenses, less received commissions for ceded reinsurance and profit share. Net income from investments Financial income consist of interest income on financial investments, dividend received, realised gains related to financial assets, change in fair value of financial assets at fair value through profit or loss, and gains on financial derivatives. Interest income is recognised in profit or loss using the effective interest method. Financial expenses consist of interest expenses on loans that are not part of the banking operations, realised losses related to financial assets, change in fair value of financial assets at fair value through profit or loss, recognised impairment on financial assets and recognised loss on financial derivatives. All expenses related to loans are recognised in profit or loss using the effective interest method. FOREIGN currency Foreign currency transactions Every company in the Group determines its functional currency, and transactions in the entities financial statements are measured in the functional currency of the subsidiary. Transactions in foreign currencies are translated to the respective functional currencies of the respective Group entities at exchange rates at the date of the transaction. At the reporting date monetary items are retranslated to the functional currency at exchange rates at that date. Non-monetary items denominated in foreign currencies that are measured at historical cost, are retranslated using the exchange rates at the date of the transac-

gjensidige annual report 2010 85 tion. Non-monetary items denominated in foreign currencies that are measured at fair value, are retranslated to the functional currency at the exchange rates at the date when the fair value was determined. Exchange differences arising on retranslations are recognised in profit or loss, except for differences arising on the retranslation of financial instruments designated as hedge of a net investment in a foreign operation that qualifies for hedge accounting. These are recognised in other comprehensive income. Foreign operations Foreign operations that have other functional currencies are translated to nok by translating the income statement at average exchange rates for the period of activity, and by translating the balance sheet at exchange rates at the reporting date. Exchange differences are recognised as a separate component of equity. On disposal of the foreign operation, the cumulative amount of the exchange difference recognised in other comprehensive income relating to that foreign operation is recognised in profit of loss, when the gain or loss on disposal is recognised. Exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form a part of the net investment in the foreign operation and are recognised in other comprehensive income. Goodwill arising on the acquisition of a foreign operation and fair value adjustments of the carrying amount of assets and liabilities arising on the acquisition of the foreign operation are treated as assets and liabilities of the foreign operation. TANgiBle assets Owner-occupied property, plant and equipment Recognition and measurement Items of owner-occupied property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the item. In cases where equipment or significant items have different useful lives, they are accounted for as separate components. Owner-occupied property is defined as property that is used by Gjensidige for conducting its business. If the properties are used both for the company s own use and as investment properties, classification of the properties is based on the actual use of the properties. Subsequent costs Subsequent costs are recognised in the asset s carrying amount when it is probable that the future economic benefits associated with the asset will flow to the Group, and the cost of the asset can be measured reliably. If the subsequent cost is a replacement cost for part of an item of owner-occupied property, plant and equipment, the cost is capitalized and the carrying amount of what has been replaced is derecognised. Repairs and maintenances are recognised in profit or loss in the period in which they are incurred. Gjensidige may engage in refurbishment, major upgrades or new property projects. The costs for these are recognised using the same principles as for an acquired asset. Depreciation Each component of owner-occupied property, plant and equipment are depreciated using the straight-line method over estimated useful life. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows owner-occupied property 10-50 years plant and equipment 3-5 years Depreciation method, expected useful life and residual values are reassessed annually. An impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount. Investment properties Investment properties are properties held either to earn rental income or for capital appreciation, or for both. These properties are not used in production, deliveries of goods and services, or for administrative purposes. Investment properties are measured initially at cost, i.e. the purchase price including directly attributable expenses associated with the purchase. Investment properties are not depreciated. Subsequent to initial recognition investment properties are measured at fair value, and any changes in fair value are recognised in profit or loss. Fair value is based on market prices, after consideration of any differences in type, location or condition of the individual property. Where market prices are not available, the properties are individually assessed by discounting the expected future net cash flow by the required rate of return for each investment. The net cash flow takes into account existing rental contracts and expectations of future rental income based on the current market situation. The required rate of return is determined based on the expected future risk-free interest rate and an individually assessed risk premium, dependent on the rental situation and the location and standard of the building. An observation of yields reported from market transactions is also performed. The valuation is carried out both by external and internal expertise having substantial experience in valuing similar types of properties in geographical areas where the Group s investment properties are located. In cases of change of use and reclassification to owner-occupied property, fair value at the date of the reclassification is used as cost for subsequent reporting. INtaNgiBle assets Goodwill Goodwill acquired in a business combination represents cost price of the acquisition in excess of the Group s share of the net fair value of identifiable assets, liabilities and contingent liabilities in the acquired entity at the time of acquisition. Goodwill is recognised initially at cost and subsequently measured at cost less accumulated impairment losses. Goodwill acquired in a business combination is not amortised, but is tested for impairment annually or more frequently, when indications of impairment losses exist. For investments accounted for according to the equity method, carrying amount of goodwill is included in the carrying amount of the investment. Other intangible assets Other intangible assets which consist of customer relationships, perspektiv results

86 gjensidige annual report 2010 trademarks, internally developed software and other intangible assets that are acquired separately or as a group are recognised at historical cost less accumulated amortisation and accumulated impairment losses. New intangible assets are capitalized only if future economic benefits associated with the asset are probable and the cost of the asset can be measured reliably. Development expenditures (both internally and externally generated) is capitalized only if the development expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete the development and to use or sell the asset. Amortisation Intangible assets, other then goodwill is amortised on a straight-line basis over the estimated useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows customer relationships 10 years trademarks 10 years internally developed software 5 8 years other intangible assets 5 10 years The amortisation period and amortisation method are reassessed annually. An impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount. IMpairMENT of NON-fiNANcial assets Indicators of impairment of the carrying amount of tangible and intangible assets are assessed at each reporting date. If such indicators exist, then recoverable amount of an assets or a cash generating unit is estimated. Indicators that are assessed as significant by the Group and might trigger testing for an impairment loss are as follows significant reduction in earnings in relation to historical or expected future earnings significant changes in the Group s use of assets or overall strategy for the business significant negative trends for the industry or economy other external and internal indicators Goodwill is tested for impairment annually. The annual testing of goodwill is performed in the third quarter. Recoverable amount is the greater of the fair value less costs to sell and value in use. In assessing value in use, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets generating cash inflows that are largely independent of cash inflows from other assets or groups of assets (cash-generating unit). Goodwill is allocated to the cash-generating unit expecting to benefit from the business combination. Impairment losses are recognised in profit or loss if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to the carrying amount of goodwill and then proportionally to the carrying amount of each asset in the cash-generating unit. Previously recognised impairment losses are reversed if the prerequisites for impairment losses are no longer present. Impairment losses will only be reversed if the recoverable amount does not exceed the amount that would have been the carrying amount at the time of the reversal if the impairment loss had not been recognised. Impairment losses recognised for goodwill will not be reversed in a subsequent period. On disposal of a cash generating unit, the goodwill attributable will be included in the determination of the gain or loss on disposal. TECHNical provisions Provision for unearned premiums, gross The provision for unearned premiums, gross reflects the accrual of premiums written. The provision corresponds to the unearned portions of the premiums written. No deduction is made for any expenses before the premiums written are accrued. In the case of group life insurance for the commercial market, the provision for unearned premiums, gross also includes provisions for fully paid whole-life cover (after the payment of disability capital). Claims provision, gross The claims provision comprise provisions for anticipated future claims payments in respect of claims incurred, but not fully settled at the reporting date. These include both claims that have been reported to the company (RBns reported but not settled) and those that have not yet been reported (IBnr incurred but not reported). The provisions related to reported claims are assessed individually by the Claims Department, while the IBnr provisions are calculated based on empirical data for the time it takes from a loss or claim occurring (date of loss) until it is reported (date reported). Based on experience and the development of the portfolio, a statistical model is prepared to calculate the scope of post-reported claims. The appropriateness of the model is measured by calculating the deviation between earlier post-reported claims and post-reported claims estimated by the model. Claims provisions are not normally discounted. For contracts in Denmark with annuity payments over a long horizon, discounting is performed. IFrs 4 permits the use of different policies within the Group in this area. Claims provisions contain an element that is to cover administrative expenses incurred in settling claims. Adequacy test A yearly adequacy test is performed to verify that the level of the provisions is sufficient compared to the company s liabilities. Current estimates for future claims payments for the company s insurance liabilities at the reporting date, as well as related cash flows, are used to perform the test. This includes both claims incurred before the reporting date (claims provisions) and claims that will occur from the reporting date until the next annual renewal (premium provisions). Any negative discrepancy between the original provision and the liability adequacy test will entail provision for insufficient premium level. Provisions for life insurance Technical provisions regarding life insurance in Gjensidige Pensjonsforsikring are premium reserve, claims provision and additional provision. The technical provisions related to the unit linked contracts are determined by the market value of the financial assets. The unit linked

gjensidige annual report 2010 87 contracts portfolio is not exposed to investment risk related to the customer assets since the customers are not guaranteed any return. In addition there is a portfolio of annuity contracts which have an average 3.6 per cent annually guaranteed return on assets. Reinsurers share of insurance-related liabilities in general insurance, gross Reinsurers share of insurance-related liabilities in general insurance, gross is classified as an asset in the balance sheet. Reinsurers share of provision for unearned premiums, gross and reinsurers share of claims provision, gross are included in reinsurers share of insurancerelated liabilities in general insurance, gross. The reinsurers share is less expected losses on claims based on objective evidence of impairment losses. FINANcial INstruMENts Financial instruments are classified in one of the following categories at fair value through profit or loss available for sale investments held to maturity loans and receivables financial derivatives financial liabilities at amortised cost and placements in a model, and then use interest rate swaps to balance out potential remaining risk. Interest rate swaps are measured at fair value, and in order to avoid inconsistent measurement, bonds and certificates with fixed interest-rates subject to interest rate hedging are measured at fair value. Transaction expenses are recognised in profit or loss when they incur. Financial assets at fair value through profit or loss are measured at fair value at the reporting date. Changes in fair value are recognised in profit or loss. The category at fair value through profit or loss comprises the classes shares and similar interests and bonds and other fixed income assets. Available for sale Financial assets available for sale are non-derivative financial assets that have been recognised initially in this category, or are not recognised initially in any other category. Subsequent to initial recognition financial assets in this category are measured at fair value, and gain or loss is recognised in other comprehensive income except for impairment losses, which are recognised in profit or loss. The Group has no financial assets in this category. perspektiv results Recognition and derecognition Financial assets and liabilities are recognised when Gjensidige becomes a party to the instrument s contractual terms. Initial recognition is at fair value. For instruments that are not derivatives or measured at fair value through profit or loss, transaction expenses that are directly attributable to the acquisition or issuance of the financial asset or the financial liability, are included. Normally initial recognition will be equal to the transaction price. Subsequent to initial recognition the instruments are measured as described below. Financial assets are derecognised when the contractual rights to cash flows from the financial asset expire, or when the Group transfers the financial asset in a transaction where all or practically all the risk and rewards related to ownership of the assets are transferred. At fair value through profit or loss Financial assets and liabilities are classified at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. All financial assets and liabilities can be designated at fair value through profit or loss if the classification reduces a mismatch in measurement or recognition that would have arisen otherwise as a result of different rules for the measurement of assets and liabilities the financial assets are included in a portfolio that is measured and evaluated regularly at fair value Gjensidige holds an investment portfolio that is designated at fair value at initial recognition, and that is managed and evaluated regularly at fair value. This is according to the Board of Directors approved risk management and investment strategy, and information based on fair value is provided regularly to the Senior Group Management and the Board of Directors. The banking operation has established a liquidity portfolio which is continuously measured and reported at fair value. The bank has a goal of having low interest rate risk and plans and manages the interest rate risk so that one aggregates fixed-rate positions on both deposits, loans Investments held to maturity Investments held to maturity are non-derivative financial assets with payments that are fixed or which can be determined in addition to a fixed maturity date, in which a business has intentions and ability to hold to maturity with the exception of those that the business designates as at fair value through profit or loss at initial recognition those that meet the definition of loans and receivables Investments held to maturity are measured at amortised cost using the effective interest method, less any impairment losses. The category investments held to maturity comprises the class bonds held to maturity. Loans and receivables Loans and receivables are non-derivative financial assets with payments that are fixed or determinable. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Interest-free loans are issued to finance fire alarm systems within agriculture for loss prevention purposes. These loans are repaid using the discount granted on the main policy when the alarm system is installed. The category loans and receivables comprises the classes loans, receivables related to direct operations and reinsurance, other receivables, prepaid expenses and earned, not received income and cash and cash equivalents and obligations classified as loans and receivables. Financial derivatives Financial derivatives are used in the management of exposure to equities, bonds and foreign exchange in order to achieve the desired level of risk and return. The instruments are used both for trading purposes and for hedging of other balance sheet items. Any trading of financial derivatives is subject to strict limitations.

88 gjensidige annual report 2010 The Group uses financial derivatives, amongst other to hedge foreign currency exchanges arising from the ownership of foreign subsidiaries with other functional currency. Transaction expenses are recognised in profit or loss when they incur. Subsequent to initial recognition financial derivatives are measured at fair value and changes in fair value are recognised in profit or loss. Hedge accounting is applied on the largest subsidiaries. Gains and losses on the hedging instrument relating to the effective portion of the hedge are recognised in other comprehensive income, while any gains or losses relating to the ineffective portion are recognised in profit or loss. If subsidiaries are disposed of, the cumulative value of such gains and losses recognised in other comprehensive income is transferred to profit or loss. Where hedge accounting is not implemented, this implies a divergent treatment of the hedged object and the hedge instrument used. The category financial derivatives comprises the classes financial derivatives at fair value through profit or loss and financial derivatives used as hedge accounting. Financial liabilities at amortised cost Financial liabilites are measured at amortised cost using the effective interest method. When the time horizon of the financial liability s due time is quite near in time the nominal interest rate is used when measuring amortised cost. The category financial liabilities at amortised cost comprises the classes deposits from and liabilities to customers, interest-bearing liabilities, other liabilities, liabilities related to direct insurance and accrued expenses and deferred income. Interest-bearing liabilities consist mainly of issued certificates and bonds, and buy-back of own issued bonds. Definition of fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm s length distance. Different valuation techniques and methods are used to estimate fair value depending on the type of financial instruments and to which extent they are traded in active markets. Instruments are classified in their entirety in one of three valuation levels in a hierarchy on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Quoted prices in active markets are considered the best estimate of an asset/liability s fair value. When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data. When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/ liabilities is estimated based on valuation techniques which are based on non-observable market data. For further description of fair value, see note 9. Definition of amortised cost Subsequent to initial recognition, investments held to maturity, loans and receivables and financial liabilities that are not measured at fair value are measured at amortised cost using the effective interest method. When calculating effective interest rate, future cash flows are estimated, and all contractual terms of the financial instrument are taken into consideration. Fees paid or received between the parties in the contract and transaction costs that are directly attributable to the transaction, are included as an integral component of determining the effective interest rate. IMpairMENT of financial assets Loans, receivables and investments held to maturity For financial assets that are not measured at fair value, an assessment of whether there is objective evidence that there has been a reduction in the value of a financial asset or group of assets is made on each reporting date. Objective evidence might be information about credit report alerts, defaults, issuer or borrower suffering significant financial difficulties, bankruptcy or observable data indicating that there is a measurable reduction in future cash flows from a group of financial assets, even though the reduction cannot yet be linked to an individual asset. An assessment is first made to whether objective evidence of impairment of financial assets that are individually significant exists. Financial assets that are not individually significant or that are assessed individually, but not impaired, are assessed in groups with respect to impairment. Assets with similar credit risk characteristics are grouped together. If there is objective evidence that the asset is impaired, impairment loss are calculated as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. Available for sale For financial assets available for sale, an assessment to whether the assets are impaired is carried out quarterly. If a decline in fair value of an available-for-sale financial asset, compared to cost, is significant or has lasted longer than nine months, the cumulative loss measured as the difference between the historical cost and current fair value, less impairment loss on that financial asset that previously has been recognised in profit or loss - is removed from equity and recognised in profit or loss even though the financial asset has not been derecognised. Impairment losses recognised in profit or loss are not reversed through profit or loss, but in other comprehensive income. DIVIDEND Dividend from investments is recognised when the Group has an unconditional right to receive the dividend. Proposed dividend is recognised as a liability from the point in time when the General Meeting approves the payment of the dividend. PROVISIONS Provisions are recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

gjensidige annual report 2010 89 Information about contingent assets are disclosed where an inflow of economic benefits is probable. Information about a contingent liability is disclosed unless the possibility of an outflow of resources is remote. Restructuring Provision for restructuring are recognised when the Group has approved a detailed and formal restructuring plan which has commenced or has been announced. Provisions are not made for future expenses attributed to the operations. PENsioNS Gjensidige has both defined contribution and defined benefit plans for its employees. The defined benefit plan has been placed in a separate pension fund and is closed to new employees. The defined contribution plan is a post-employment benefit plan under which Gjensidige pays fixed contributions into a separate entity and there is no legal or constructive obligation to pay further amounts. Obligatory contributions are recognised as employee benefit expenses in profit or loss when they are due. The defined benefit plan is a post-employment benefit plan that entitles employees to contractual future pension benefits. Pension liabilities are determined on the basis of linear earning and using assumptions of length of service, discount rate, future return on plan assets, future growth in wages, pensions and social security benefits from the National Insurance, and estimates for mortality and staff turnover, etc. Plan assets are measured at fair value, and are deducted from pension liabilities in the net pension liabilities in the balance sheet. Any surplus is recognised if it is likely that the surplus can be used. Deferred tax Deferred tax is determined based on differences between the carrying amount and the amounts used for taxation purposes, of assets and liabilities at the reporting date. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that they can be offset by future taxable income. If deferred tax arises in connection with the initial recognition of a liability or asset acquired in a transaction that is not a business combination, and it does not affect the financial or taxable profit or loss at the time of the transaction, then it will not be recognised. Deferred tax liabilities are recognised for temporary differences resulting from investments in subsidiaries and associates, except in cases where the Group is able to control the reversal of temporary differences, and it is probable that the temporary difference will not be reversed in foreseeable future. Deferred tax assets that arise from deductible temporary differences for such investments are only recognised to the extent that it is probable that there will be sufficient taxable income to utilise the asset from the temporary difference, and they are expected to reverse in the foreseeable future. Current and deferred tax Current tax and deferred tax are recognised as an expense or income in the income statement, with the exception of deferred tax on items that are recognised in other comprehensive income, where the tax is recognised in other comprehensive income, or in cases where deferred tax arises as a result of a business combination. For business combinations, deferred tax is calculated on the difference between fair value of the acquired assets and liabilities and their carrying amount. Goodwill is recognised without provision for deferred tax. perspektiv results Any actuarial gains and losses related to defined benefit plan is recognised in other comprehensive income. Share-based payment The fair value of share-based payment arrangements allocated to employees is at the time of allocation recognised as personnel costs, with a corresponding increase in equity. Share-based payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. None-recovery conditions are reflected in the measurement of fair value, and no adjustment of the amount charged as expenses is done upon failing to meet such conditions. Share-based payment transactions in which the company receives goods or services as payment for the company s own equity instruments is recognised as share-based payment transactions with settlement in equity, regardless of how the company has acquired the equity instruments. Share-based payment arrangements settled by one of the shareholders in the ultimate mother company is also recognised as a share-based payment transaction with settlement in equity. TAX Income tax expense comprises the total of current tax and deferred tax. Current tax Current tax is tax payable on the taxable profit for the year, based on tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. RELATED party transactions Intra-group balances and transactions are eliminated in preparing the consolidated financial statements. The provider of intra-group services, that are not considered core activities, will as a main rule, allocate its incurred net costs (all costs included) based on a Cost Contribution Arrangement as described in oecd Guidelines chapter 8 and on the basis of paragraph 13-1 in the Norwegian Tax Act. Identified functions that are categorized as core activities will be charged out with a reasonable mark up or alternatively at market price if identifiable, comparable prices exist. TRANsactioNS with affiliated companies The Fire Mutuals operates as agents on behalf of Gjensidige Forsikring. For these services commission is paid. For handling the cooperation and to reinsure the Fire Mutuals fire insurance Gjensidige receives cost refunds. Due to the fire policy reinsurance plan, Gjensidige Forsikring also manages assets on behalf of the Fire Mutuals. The Fire Mutuals are credited interest for these assets.

90 gjensidige annual report 2010 Notes 1 EQuitY Share capital At the end of the year the share capital consisted of 500 million ordinary shares with a nominal value of nok 2, according to the statutes. All issued shares are fully paid in. The owners of ordinary shares have dividend and voting rights. There are no rights attached to the holding of own shares. In thousand equity certificates/shares 2010 In thousand equity certificates/shares 100,000 Share split 400,000 Outstanding 31 December 500,000 In connection with conversion from limited liability mutual (BA) to public limited liability company (asa) on 28 June 2010 the equity certificate capital is converted to share capital. In thousand equity certificates 2009 Outstanding 1 January 77,200 Capital reduction 22,800 Capital reduction 100,000 As at 30 September 2009 the equity certificate capital was reduced to nok 1,000.0 million, divided into 100 million equity certificates with a nominal value of nok 10. The amount being reduced was transferred with equal amounts to premium reserve and equalization fund belonging to class I capital. The change did not change the ownership fraction between class I capital and class ii capital. Own shares At the end of the year the number of own shares was 26,983 (0). In the column for own shares the nominal value of the company s holdings of own shares is presented. Amounts paid in that exceeds the nominal value is charged to other equity so that the cost of own shares reduces the Group s equity. Premium reserve Premium reserve consists of paid in capital and can be used to cover losses. Other paid in equity Other paid in equity consists of wage costs that are recognised in profit and loss as a result of the share purchase program for employees. Exchange differences Exchange differences consist of exchange differences that occur when converting foreign subsidiaries, and when converting liabilities that hedge the company s net investment in foreign subsidiaries. Actuarial gains/losses pension Actuarial gains/losses pension consists of gains/losses occurring by changing the actuarial assumptions used when calculating pension liability. Other earned equity Other earned equity consists of this year s and previous year s retained earnings that are not disposed to other purposes. Dividend Proposed and approved dividend Nok million 1 2010 2009 As at 31 December nok 4.70 per ordinary share (2009: nok 3.30) 2,350.0 1,650.0 1 proposed dividend for 2010 is not recognised at the reporting time, and it does not have any tax consequences.

gjensidige annual report 2010 91 2 use of estimates The preparation of the financial statements under IFrs and the application of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the carrying amounts of assets and liabilities, income and expenses. The estimates and the associated assumptions are based on experience and other factors that are assessed as being justifiable based on the underlying conditions. Actual figures may deviate from these estimates. The estimates and associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods. The accounting policies that are used by Gjensidige in which the assessments, estimates and prerequisites may deviate significantly from the actual results are discussed below. Investment properties Fair value is based on market prices and generally accepted valuation models where there are no market prices. A key parameter of the valuation is the long-term required rate of return for the individual property. A further description of the real estate price risk and a sensitivity analysis of investment properties are given in note 8. Plant and equipment, owner-occupied property and intangible assets Plant and equipment, owner-occupied property and intangible assets are assessed annually to ensure that the depreciation method and the depreciation period used are in accordance with useful life. The same applies to residual value. Impairment losses will be recognised if impairment exists. An ongoing assessment of these assets is made in the same manner as investment properties. Goodwill is tested for impairment annually or more often if there are indications that the amounts may be subject to impairment. The testing for impairment entails determining recoverable amount for the cashgenerating unit. Normally recoverable amount will be determined by means of discounted cash flows based on business plans. The business plans are based on prior experience and the expected market development. See note 5 and 7. Financial assets and liabilities The fair value of financial assets and liabilities that are not traded in an active market (such as unlisted shares) is determined by means of generally accepted valuation methods. These valuation methods are based primarily on the market conditions at the reporting date. See note 9. Loans and receivables For financial assets that are not measured at fair value, it is assessed whether there is objective evidence that there has been a reduction in the value of a financial asset or a group of financial assets on each reporting date. See note 11. Insurance-related liabilities Use of estimates in calculation of insurance-related liabilities is primary applicable for claims provisions. Insurance products are divided in general into two main categories; lines with short or long settlement periods. The settlement period is defined as the length of time that passes after a loss or injury occurs (date of loss) until the claim is reported and then paid and settled. Short-tail lines are e.g. property insurance, while long-tail lines primarily involve accident and health insurances. The uncertainty in short-tail lines of business is linked primarily to the size of the loss. For long-tail lines, the risk is linked to the fact that the ultimate claim costs must be estimated based on experience and empirical data. For certain lines within accident and health insurances, it may take ten to 15 years before all the claims that occurred in a calendar year are reported to the company. In addition, there will be many instances where information reported in a claim is inadequate to calculate a correct provision. This may be due to ambiguity concerning the causal relationship and uncertainty about the injured party s future work capacity etc. Many personal injury claims are tried in the court system, and over time the level of compensation for such claims has increased. This will also be of consequence to claims that occurred in prior years and have not yet been settled. The risk linked to provisions for lines related to insurances of the person is thus affected by external conditions. To reduce this risk, the company calculates its claims liability based on various methods and follows up that the registered provisions linked to ongoing claims cases are updated at all times based on the current calculation rules. See note 3 and 14. Pension The present value of pension liabilities is calculated on the basis of actuarial and financial assumptions. Any change in the assumptions affects the estimated liability. Changes in the discount rate is the assumption most significant to the value of the pension liability. The discount rate and other assumptions are normally reviewed once a year when the actuarial calculations are performed unless there have been significant changes during the year. See note 15. perspektiv results

92 gjensidige annual report 2010 3 MANageMENT of INsuraNce AND financial risk OVERVIEW Management of risk is an integrated part of the daily operations in Gjensidige. Identification, assessment, management and control of the risk exposure as well as analyses of the effects of potential strategic decisions on the level of risk-taking is an essential part of the operations to ensure that the level of risk-taking is in keeping with the approved risk appetite and to enhance value creation. An overall management of risks ensures that risks are assessed and handled in a consistent way throughout the Group. Risk management in Gjensidige has two main objectives. First, the risk exposure should not exceed capacity. Secondly, but equally important, a comprehensive risk management should help create value for customers and owners. Through a strong risk management process, risks are identified, analysed, measured and managed not only with the purpose of reducing uncertainty and avoiding extreme losses, but also to maximize the return relative to the risk. General insurance constitutes the major part of the operations and risks of the Group, through Gjensidige Forsikring in Norway and its branches and subsidiaries in Sweden, Denmark and the Baltic. Gjensidige also offers pension, investment and savings products through the subsidiaries Gjensidige Pensjonsforsikring (gpf) and Gjensidige Investeringsrådgivning (gir). In addition, Gjensidige offers banking services through Gjensidige Bank and various health care services in Norway and Sweden through Hjelp24. The basis of insurance is transfer of risk, from the insured to the insurer. Gjensidige receives insurance premiums from a large number of policy holders and commits to compensate in case a loss occurs. Naturally, insurance risk is a major component of risk for the Group. Insurance premiums are received in advance and set aside in order to cover future claims. The actuarial provisions combined with the Company s equity are invested, and consequently the Group is exposed to market and credit risk as well. Gjensidige offers many different insurance products aimed at private customers, agriculture, business and commerce in Norway. In Sweden, private and commercial insurance is offered through a Swedish branch of Gjensidige Forsikring asa. The remaining company in Sweden, Tennant Försäkringsaktiebolag AB mainly operates the Group s white label business in Norway through its own branch structure. The Group also provides general insurance through a Danish branch of Gjensidige Forsikring asa, as well as through the subsidiaries Nykredit Forsikring A/S and Gjensidiges Arbejdsskadeforsikring A/S, and in the Baltic through its subsidiary Gjensidige Baltic. In the areas of pension, savings and investment advice, there will be insurance and financial risk in the subsidiary Gjensidige Pensjonsforsikring (gpf). Within the commercial market gpf offers defined-contribution occupational pensions with related risk coverage such as disability insurance, disability pension and child and spouse pensions. In addition gpf manages funds related to paid-up policy portfolios. Within the private market gpf offers life and pension products and pure risk products such as disability pension. Mortality and disability risks are the two main insurance risks within gpf, whereas the greatest financial risk is related to the guaranteed return for the paid-up policies. Gjensidige Bank offers banking products primarily to private individuals and organisations in the Norwegian market. Gjensidige Bank is mainly exposed to credit and liquidity risk. In addition to insurance operations and banking business, the Group has a leading position in corporate health care services through its subsidiary Hjelp24 as which offers personal security alarm services, private hospital and specialist services and work environment surveys. The health operations have been established to strengthen the Group s competitive position as a complete supplier in the fields of safety and personal health care. The main risk for Hjelp24 is more or less the same business risk that is found in any other service provider, i.e. generating enough business volume to cover fixed costs with sufficient margins. Figure 1 Operational structure CEO Strategy, finance and economic control Group services Compliance Group Group audit Product/ underwriting General insurance Pension and saving Online retail banking Health care services Private Commercial International general insurance

gjensidige annual report 2010 93 Figure 2 Business structure GJENSIDIGE FORSIKRING ASA Gjensidige Bank ASA Gjensidige Pensjonsforsikring AS Gjensidige Investeringsrådgivning ASA Gjensidige Forsikring ASA Tennant Försäkringsaktiebolag AB Gjensidige Forsikring ASA AS Gjensidige Baltic Hjelp24 AS Norway Norway Norway Danish branch Sweden Swedish branch Latvia Norway Gjensidige Bank Boligkreditt AS Gjensidiges Arbejdsskadeforsikring A/S * Nykredit Forsikring A/S * Tennant Forsikring NUF Lithuanian branch Estonian branch Norway Denmark Denmark Norway Lithuania Estonia Banking Pension and savings The figure shows principal operational subsidiaries and branches in Gjensidige * Gjensidiges Arbejdsskadeforsikring A/S and Nykredit Forsikring A/S is owned by Gjensidige Forsikring ASA, but run by the Danish branch Given the division of the operations into operative and reporting segments, the Group has chosen to also divide the information in this note into general insurance, life insurance/savings and banking business areas, with the exception of certain contexts where it has been natural to present these areas as one. For the description of the management of financial risk within the general insurance operations the focus is on the Group s total general insurance operations and separate tables have not been set up for Gjensidige Forsikring asa. This reflects the way in which the financial risk is managed. ORGANIsatioN The Board of Directors has the overall responsibility for ensuring that the level of risk-taking in the Group is satisfactory relative to the Group s financial strength and willingness to take risks. This entails ensuring that necessary policies, routines and reporting are in place to guarantee a satisfactory risk management and compliance with laws and regulations and that the risk management and internal control efforts will be appropriately organized and documented. General insurance and white label Health Owned through holding company Branch Subsidiary The group Ceo is responsible for the overall risk management in the Group. The Group s risk management committee, chaired by the group Ceo, has a supervisory role with regard to the Group s total risk situation and an advisory role to the group Ceo with regard to risk management. The responsibility to help prepare for the risk management committee s work and to facilitate the Group s internal control processes is delegated to the Chief Risk Officer. Likewise, the Head of Group Compliance, which reports on professional matters to the group Ceo, is responsible for the Group s process for preventing and detecting compliance risk pursuant to laws and regulations as well as internal policies and instructions. The responsibility for the ongoing risk management is delegated to the responsible line managers in their respective areas. Gjensidige has centralized risk control functions, such as risk management, compliance and actuarial functions. Moreover, the Group has an independent internal audit function, which monitors risk management and internal control to ensure that they function properly and which reports directly to the Board of Directors. perspektiv results Figure 3 The management system is organized with three lines of defence BOARD OF DIRECTORS/AUDIT COMMITTEE Group Management Group risk committee Chief Risk Officer Business management Actuary function Compliance function Internal audit 1st LINE Perform risk management and internal control 2nd LINE Assess, monitor, give advice and recommendations, quality assurance, quantification, aggregation of risk 3rd LINE Audit the framework for risk management and internal control, report to the Board of Directors

94 gjensidige annual report 2010 The responsibility for both the overall risk management in the Group and the execution of investments for the insurance operations is vested in the organization of the Deputy Ceo, whereas the function for monitoring and reporting financial returns and compliance with constraints in investment management of the insurance business reports in the line to the Executive Vice President, Group Staff/General Services in order to ensure an independent follow-up. In addition, the Chief Risk Officer has an independent line of reporting to the Group s risk management committee. The responsibility for all investment management is centralized in the Group s investment department. The responsibility for the reserve setting in the insurance companies is correspondingly centralized in the Group s actuary department. All internal guidelines and requirements for risk taking are based on comprehensive group policies and are subject to approval by the Board of Directors in each company where this derives from local legislation. A group-wide credit committee chaired by the Deputy Ceo has been established to set credit limits for individual issuers of credit together with general guidelines for counterparty risk. CAPITAL MANageMENT The core function of insurance is the transfer of risk, and the Group is exposed to risk in both its insurance and investment operations. Identification, measurement and management of risk are essential parts of the operations. Risk and capital are and must be interlinked. Any insurance company must adapt its risk exposure to its capital base. On the other hand, solvency capital - or equity - has a cost. A key objective of capital management is to balance these two aspects. Gjensidige s overall capital management objectives are firstly to ensure that the capitalization of the Group can sustain an adverse outcome without creating a financially distressed situation and secondly that the Group s capital is used in the most efficient way. Gjensidige s minimum capitalization is determined on the basis of the strictest of three criteria: regulatory requirements, rating requirements and internal risk-based requirements. The Group has a very strong capitalization position from all three of these perspectives. Insurance operations and banking business are subject to capital requirements specified by the authorities. Capital adequacy and solvency positions are reported for the Group and subsidiaries to the financial supervisory authorities. In the calculations of excess capital, consideration was given to an assumed dividend of nok 2,350 million for the 2010 financial year, which reduces the excess capital equivalently from all three perspectives. For the Group, the rating requirements are most binding. Gjensidige Forsikring s target financial strength rating is A (single A) from Standard & Poor s or the equivalent from another rating institution. This target has been achieved by actual rating of A (Stable) from Standard & Poor s (unchanged since 1999, last updated on 23 August 2010). The rating is subject to an annual review. Standard & Poor s rating model is used as an approximation of the capital requirements from this perspective, even though a number of other factors also play an important role in determining the Group s rating. Based on data as at 31 December 2010, the excess capital relative to the targeted A rating is estimated at nok 6,388.6 million. The subsidiaries do not have their own interactive rating, although the rating for Gjensidige Forsikring is based on the Group s financial position. In accordance with capital adequacy rules (Bis rules) as at 31 December 2010 the excess capital was nok 6,894.1 million, equivalent to a capital adequacy ratio of 16.1 per cent. As associates, the stakes in Storebrand and SpareBank1 sr-bank are consolidated in the calculation of capital adequacy. The Group s excess capital above the solvency margin requirements was nok 9,373.5 million as at 31 December 2010. Table 1 Capital in excess of legal requirements NOK million 2010 2009 Requirement Gjensidige Forsikring 11,066.5 8,794.6 Capital adequacy (8%) Gjensidige Arbejdsskadeforsik. 140.2 217.6 Individual solvency test Nykredit Forsikring 1,188.0 N/A Individual solvency test Tennant Forsäkring 268.9 241.2 Traffic Light Model Gjensidige Baltikum 100.2 88.1 Solvency I requirement (100%) Gjensidige Bank 617.9 634.4 Capital adequacy (8%) Gjensidige Pensjon og sparing 239.1 243.3 Capital adequacy (8%) The solvency margin in Gjensidige Baltic does not include the profit for the year until the completion of the auditing of the financial statement for 2010. In Denmark, an individual solvency calculation was introduced as an adaptation to the upcoming Solvency ii regulations. In 2010, Nykredit Forsikring A/S was acquired. In 2010 operations in Fair Forsikring A/S and KommuneForsikring A/S were transferred to a branch of Gjensidige Forsikring asa, whereas Gjensidiges Arbejdsskadeforsikring A/S and Nykredit Forsikring A/S continues as separate companies. The operations in Gjensidige Sverige were transferred to a branch of Gjensidige Forsikring asa 1 October 2009, whereas Tennant Forsäkringsaktiebolag AB, which has the Group s white label business, will continue as a separate company owned by the holding company, Tennant Holding AB. In Sweden, a so-called Traffic-light calculation is introduced in order to adapt to the upcoming Solvency ii regulations. Gjensidige Forsikring and all subsidiaries met all regulatory capital requirements during 2010. The internal capital requirement is set in the Group s capital management policy, which is approved by the Board of Directors. It is defined as the capital that is necessary in order to have a probability of 99.97 per cent of not using up all capital measured over one year, including all of the general insurance group s assets and liabilities and without counting the expected profit performance during the period as available capital. In this context profit/loss and available capital are measured according to economic principles, even if these may deviate from the accounting policies, in keeping with the proposals that have been made for the Solvency ii regulations. Among other things, this means that actuarial reserves are assessed at the discounted value instead of at recognised (nominal) value. Both method and level of probability are in keeping with what seems to have been established as an industry standard in Europe. The internal requirement is measured by means of Gjensidige s internal model as described below. Gjensidige has, over several years, been developing an internal stochastic simulation model for its insurance operations, based on state-of-theart modeling technology. The model is customized to Gjensidige s risk profile and provides fully stochastic simulations of both insurance and investment operations. This model is a key tool for aggregated risk measurement and capital management as it provides an overview of the aggregated risk profile. The main areas of use of the internal model are Overall risk profile and capital need Capital allocation Capital consequences of asset allocation Requirements for and optimization of reinsurance Using the internal model, with the definition of internal capital as stated above, the internal capital requirement for the insurance group was set at nok 12,200 million at the end of 2010, compared to nok 11,400 million at the end of 2009. The capital requirements have increased as a result of the growth in the balance sheet, the purchase of Nykredit

gjensidige annual report 2010 95 Forsikring A/S and greater investment risk. The most important contributors are the items in Storebrand and SpareBank1 sr-bank in addition to the asset allocation with a higher percentage of shares. Figure 4 - Excess capital from different perspectives NOK million 2010 15,000 2009 12,000 9,000 6,000 3,000 0 Legal Rating based Internal, risk based The necessary capital for the insurance business is allocated to the products in order to set a more correct cost of capital for pricing and assessments of profitability. The excess capital relative to the most binding of the capital requirements is regarded as an additional buffer and is available to finance the Group s strategic growth targets. insurance in these countries have a lot of similarities. The description of risks related to the insurance business is, with a few exceptions, common for the Group. In case of significant deviations between the countries, these are commented separately. GENeral INsuraNce Frequency and severity of claims The frequency and severity of claims can be affected by several factors. The different factors will depend on the products, or lines of business (lob) considered. An increase in the frequency of claims can be due to seasonal effects more sustainable effects. During the winter season snow and cold weather will cause an increase in the frequency of claims in Motor insurance. In Property insurance cold winter will cause an increase in the frequency of claims due to frozen water pipes and increased use of electrical power and open fire places for heating of the houses. More permanent shift in the level of frequency of claims may occur due to e.g. change of customer behaviour and new types of claims. The effect on the profitability of a permanent change in the level of the frequency of claims will be high. In Motor insurance in Norway, for example, an increase of one percentage point in the level of the frequency of claims will increase the loss ratio by four percentage points. perspektiv results Gjensidige Forsikring is adapting to the upcoming Solvency ii rules, which will both replace the current capital rules and specify requirements for good risk management and reporting. One of the elements in the new rules is that it allows for the utilization of the Group s own model for setting the statutory capital requirements according to clearly defined criteria. Gjensidige s model is deemed to be a good point of departure and is further developed for this purpose. INsuraNce risk The risk under any insurance contract is the probability that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and must therefore be estimated. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency and/or severity of claims and benefits are greater than estimated. Insurance events are random, and the actual number and amount of claims and benefits will vary from year to year from the level calculated using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability around the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. Gjensidige has developed its insurance underwriting policy to diversify the types of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered. Unexpected rise in inflation rate will also have negative effect on claims and benefit payments. Gjensidige writes general insurance in Norway, Sweden, Denmark and the Baltic. General The severity of claims is affected by several factors. In some lobs, with relatively few claims, the severity may be heavily influenced by large claims. The number of incurred large claims varies significantly from one year to another. This is typically for the commercial market. In most lobs the underlying development of the severity of claims is influenced by inflation. Factors that affects the average claim may be the development of consumer price index (Cpi), salary increases, social inflation and the price for material and services purchased with claims settlement. In Property insurance the inflation will consist of Cpi and an increase in building costs, which in the past has been slightly higher than Cpi. For accident and health the insurance policies are divided into two main groups, one with fixed sum insured and another part were the compensation is adjusted by a public/government index (in Norway: G - the basic amount for national insurance). This is for instance the case in Workers Compensation. The Group writes Workers Compensation in Norway and Denmark. The regulation for this lob is quite different in these countries. In Norway Workers Compensation covers both accident and diseases, in Denmark diseases are covered by a governmental body. The compensation in Norway is exclusively restricted to lump sums, in Denmark the compensation is both lump sums and annuity payments. Annuity payments are calculated according to assumptions about mortality, interest rate and retirement age. For bodily injuries the severity of claims is also influenced by court awards, which tend to increase the compensation more than the general inflation. This is also a significant factor, due to the long period typically required to settle these cases. Gjensidige manages these risks mainly through close supervision of the development for each lob, underwriting policy and proactive claims handling. The monthly supervision of the results for each lob contains an overview of both premium and loss development. If there is an adverse development of the profitability, sufficient measures will be put in force. This includes necessary premium increases to ensure that the profitability is within the accepted level. The analysis of the profitability can be tracked further to different groups of customers and segments. The underwriting policy attempts to ensure that the underwritten risks

96 gjensidige annual report 2010 are well diversified in terms of type and amount of risk, industry and location of the risks. Underwriting limits are in place to enforce appropriate risk selection criteria and to ensure that accepted risks are within the limits of the reinsurance contracts. Premiums, deductibles and elements in the conditions may be changed at the yearly renewal of policies. Furthermore Gjensidige has the right to reject the payment of a fraudulent claim. The Company has the right to terminate individual policies in cases of insurance fraud, and in some instances legislation or policy conditions give Gjensidige the right to terminate individual policies in cases where special reasons indicate that such termination is reasonable. In cases where a claim has been paid, Gjensidige is entitled to pursue any third parties liable for the damage, for payment of some or all costs (recourse claim). The underwriting policy and guidelines in all companies are within the common acceptance of risk level. The claims handling procedures also include a clear strategy and routines for purchasing material and services in an optimal manner. The routines are to use purchase agreements to ensure the quality of our benefits to our customers and to reduce the inflation risk. Concentration of insurance risk The Gjensidige Group still has its concentration in the Norwegian general insurance market, with operations in other Nordic countries and the Baltic. The percentage share of premiums written in the Nordic countries has increased compared to 2009 after the purchase of Nykredit Forsikring in 2010. Table 2 Gross premiums written per geographical area 2010 and 2009 Gross premiums Gross premiums NOK million written 2010 Per cent of total writte 2009 Per cent of total Private Norway 8,618.9 43.6 % 8,035.3 44.0 % Commercial Norway 4,670.3 23.6 % 5,003.8 27.4 % Gjensidige Pension and savings 2,296.7 11.6 % 2,077.3 11.4 % Nordic 3,812.4 19.3 % 2,657.3 14.5 % Baltic 395.2 2.0 % 592.2 3.2 % Group eliminations (30.0) (0.2 %) (90.2) (0.5 %) Total 19,763.5 100.0 % 18,275.6 100.0 % Total Gjensidige Forsikring asa 16,313.1 82.5 % 13,153.9 72.0 % Group eliminations are regarding internal reinsurance. Table 3a Gross premiums written per line of business for the Gjensidige Group 2010 and 2009 NOK million Gross premiums written 2010 Gross premiums writte Per cent of total 2009 Per cent of total Accident and health - workers' compensation 1,216.1 6.2 % 1,270.7 7.0 % Accident and health - others/ default 2,622.3 13.3 % 2,667.8 14.6 % Motor, third party liability 2,599.6 13.2 % 2,655.2 14.5 % Motor, other classes 3,399.7 17.2 % 3,000.0 16.4 % Marine, aviation and transport 257.7 1.3 % 378.8 2.1 % Fire and other damage to property 6,027.7 30.5 % 5,108.2 28.0 % Third-party liability 492.2 2.5 % 426.0 2.3 % Other general insurance 851.5 4.3 % 691.6 3.8 % Pension and savings 2,296.7 11.6 % 2,077.3 11.4 % Total 19,763.5 100.0 % 18,275.6 100.0 % Table 3b - Gross premiums written per line of business for Gjensidige Forsikring asa 2010 and 2009 NOK million Gross premiums written 2010 Gross premiums writte Per cent of total 2009 Per cent of total Accident and health - workers' compensation 828.7 5.1 % 791.5 6.0 % Accident and health - others/default 2,445.6 15.0 % 2,394.8 18.2 % Motor, third party liability 2,337.2 14.3 % 1,798.5 13.7 % Motor, other classes 3,060.9 18.8 % 2,703.0 20.5 % Marine, aviation and transport 249.5 1.5 % 367.2 2.8 % Fire and other damage to property 5,386.5 33.0 % 4,142.8 31.5 % Third-party liability 447.3 2.7 % 288.9 2.2 % Other general insurance 1,557.4 9.5 % 667.2 5.1 % Total 16,313.1 100.0 % 13,153.9 100.0 % The reinsurance programme for the Gjensidige Group, mainly non-proportional reinsurance, is based on calculated exposure, claims history, and capital structure. The limits for the reinsurance programme for each year are set out by the Board of Directors. Reinsurance is a Group function, administered in Gjensidige Forsikring asa; this also includes fire insurance for the cooperating mutual fire insurers. In Norway the exposure to natural perils disaster is limited through Gjensidige s compulsory membership in the Norwegian Natural perils pool; the pool has its own reinsurance programme on behalf of its members, which further reduces the risk exposure. Insurance risks are deemed to be moderate with the reinsurance cover the Group has in place. Other concentration risk is mainly aggregation of fire risks and personal risk in Workers Compensation. These risks are measured by analyzing historical events, studying the insurance values exposed, and managed by reinsurance programmes. As from 2007 Gjensidige Forsikring asa is the main reinsurer for its subsidiaries, and the subsidiaries reinsurance exposure is included in the outwards reinsurance programme for the Gjensidige Group. Sources of uncertainty in the estimation of future claims payments Gjensidige is liable for insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term, and claims are paid according to the policy conditions valid at the time of occurrence. As a result, claims are settled over a long period of time, and there is an element of the claims provision that relates to incurred but not reported claims (IBnr). There are several variables that affect the amount and timing of cash flows from the insurance contracts. These variables mainly relate to the characteristics of the different types of risks covered and the applied risk management procedures. The compensation paid is according to the terms specified in the insurance contract. Compensation for claims with respect of bodily injuries are calculated as the present value of lost earnings, rehabilitation expenses and other expenses that the injured party will incur as a result of the accident or disease. In most cases in Norway, and also in other countries where Gjensidige operates, personal injury claims are paid as a lump-sum. An exception from this is Workers Compensation claims in Denmark, where claims may be paid as annuity payments. The calculations for those claims will include information about the severity of the loss, mortality rates, the number of years until retirement age and assumptions about future social welfare

gjensidige annual report 2010 97 inflation. Mortality rates are from tables approved by the supervisory authorities. The estimated cost of claims includes expenses to be incurred in settling claims, net of the expected recourse amount and other recoveries. Gjensidige takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liabilities established. The liabilities in the financial statements related to these contracts comprise a provision for IBnr, a provision for reported claims not yet paid (RBns) and a provision for unexpired risks at the balance sheet date. The amount for bodily injury claims is particularly sensitive to the level of court awards and to the development of legal precedence on matters of contract and tort. Liability insurance contracts are also subject to the emergence of new types of latent claims, but no allowance is included for this at the balance sheet date. The estimation of IBnr is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified (RBns), where information about the claim is available. IBnr claims may not be apparent to the insured until many years after the event that gave rise to the claims. In estimating the liability for the cost of reported claims not yet paid, Gjensidige considers any information available from loss adjusters, claims handlers and information about the costs of settling claims with similar characteristics in previous periods. All claims are assessed on a case-by-case basis by a claims handler. Claims with potential for distortive effects of their development are handled separately and projected to their ultimate by an additional provision (e.g. bodily injury claims in Motor insurance). Where possible, Gjensidige adopts multiple techniques to estimate the required level of provision. This provides a greater understanding of the trends inherent in the experience being projected. The projections given by the various methodologies also assist in estimating the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year. The development of the estimate of ultimate claim cost for claims incurred in a given year is presented in tables 6a and b. This gives an indication of the accuracy of Gjensidige s estimation techniques for claims payments. Insurance contracts are often classified as risks that are short-tail and risks that are long-tail. Short-tail risk is characterized by that the period between the occurrences, reporting and final settlement of claims is short. Long-tail risk is the opposite. The period between the occurrence, reporting and settlement of claims is long. In Property and Motor insurance (excluding bodily injury claims) the claims are reported soon after occurrence, while for Accident and health insurance the claims may be reported several years after the occurrence and settled several years after they were reported. The provisions for IBnr for short-tail risks are relatively small, for long-tail risks the provisions for IBnr may constitute a substantial part of the total loss provision. The duration (average time between the occurrences of claims until finally settled) differs significantly between the types of risk considered. Long duration will increase the company s exposure to inflation. In Motor insurance, physical damage, the duration is less than one year, while in Motor bodily injury claims the average duration is almost eight years. In Property insurance the average duration is one to two years, in Workers Compensation in Norway the average duration is six years. In Group life insurance the duration differs significantly between death and disability coverage. Workers Compensation in Denmark has a particularly long duration due to the annuity part. For the other lobs in the subsidiaries the duration is in line with the similar lobs in Norway. In the Baltic the duration is significantly shorter due to few bodily injury claims. Figure 5 Average duration per insurance product 0 2 4 6 8 10 Marine/Cargo Property, Commercial Property, Private Group Life, Disability Group Life, Death Accident Liability Workers Compensation (DK) Workers Compensation (NO) Motor, BI Motor, PD Years Process used to decide on assumptions The risks associated with insurance contracts are complex and subject to a number of variables that complicate quantitative sensitivity analysis. Gjensidige uses standard actuarial models based on statistical information. The provisions related to reported claims are assessed individually by a claims handler and registered into the claims system. The development of provisions for notified claims is supervised by the claims managers. In case of adverse development necessary efforts are put in force. IBnr provisions are based on empirical data, where the basis is the time it takes from a loss or injury occurring (date of loss or injury) until it is reported (date reported). Based on experience and the development of the portfolio statistical models are prepared to calculate the scope of post-reported claims. The fit of the model is measured by looking at the deviation between earlier post-reported claims and those estimated by the model. The key statistical methods used are Chain ladder methods, which use historical data to estimate the paid and incurred to date proportions of the ultimate claim costs. expected loss ratio methods (Bornhuetter-Ferguson), which uses Gjensidige s expectation of the loss ratio for a class of business. log-linear methods, which use exposure data and historical data to estimate the pattern of late reported claims, to estimate the IBnr provisions. The methods used will depend on the lob and the time period of claims data available. To the extent that these methods use historical claims development information, they assume that the historical claims development pattern will occur in the future. There are reasons why this may not be the case; which, insofar as they can be identified, have been allowed for by modifying model parameters. Such reasons include economical, legal and social trends and social inflation (e.g. a shift in court awards) perspektiv results

98 gjensidige annual report 2010 Changes in the mix of insurance contracts incepted the impact of large losses IBnr provisions and provisions for reported claims are initially estimated at a gross level, and a separate calculation is carried out to estimate the size of reinsurance recoveries. Gjensidige purchases almost exclusively excess of loss reinsurance contracts with sufficiently high retentions for only relatively few, large claims to be recoverable. The actuaries in the Gjensidige Group working with technical provisions meet regularly as a part of keeping a high professional level, and they all have access to a common actuarial software system for calculating claims provisions. During the last years Gjensidige has had processes where external actuarial firms have calculated best estimates of the technical provisions. This is done to get a second opinion of the level of the provision from independent, recognised actuarial firms. The deviation between the internal and external estimates of the claims provisions is approximately three per cent on a consolidated basis; this is within normal range for calculations of this type. Sensitivity analysis underwriting risk Underwriting risk is the risk that an insurer does not charge premiums appropriate for the insurance contracts. The pricing processes for the different insurance products involve estimates of future frequency and severity of claims, based on statistics from internal and external sources. Even if the underwriting criteria are adequate and the premium calculations are performed on a good statistical basis, the claims cost may deviate from the expected level, due to large claims, natural catastrophes etc. Gjensidige Forsikring asa and its subsidiaries have detailed underwriting guidelines. To ensure good quality in the assessment and quantification of insured risks, risk types and limits for sums insured that may be accepted are defined. This is done to ensure control of the risk exposure in the insurance portfolio. Table 4 below shows the impact on profit or loss for the year and thereby on equity at year-end, of changes in Combined Ratio (CR). Tax impact is not included in the calculations. CR is the key measure of profitability in the general insurance business. The calculations show the effect of a change of one per cent in CR for each segment. An increase in CR can be caused by an increase in the loss frequency and/ or an increase in the severity. In some lobs there is a risk that the loss frequency and the severity of claims are correlated so that an increase in the underlying insurance risk may affect both the frequency and severity of claims. Table 4 -Sensitivity analysis insurance NOK million 2010 2009 Change in cr (1 %-point) Private Norway 82.8 78.6 Commercial Norway 44.2 47.4 Total Gjensidige Forsikring asa 127.0 125.9 Nordic 39.1 24.0 Baltic 4.6 6.6 Pension and savings 3.4 1.2 Total 174.0 157.8 NOK million 2010 2009 Change in loss frequency (1 %-point) Private Norway 807.9 860.9 Commercial Norway 656.2 794.6 Total Gjensidige Forsikring asa 1,464.1 1,655.5 Change in severity of claims (+10 %) Private Norway 629.7 600.8 Commercial Norway 360.3 381.9 Total Gjensidige Forsikring asa 989.9 982.7 Changes in the composition of the insurance portfolio will also have impact on changes in the frequency and severity of claims. In times when there are changes in the composition of the insurance portfolio, the effect of changes in the frequency and severity of claims will be influenced by the percentage share of the different insurance product types in the total portfolio. Sensitivity analysis provision risk The estimation of technical provisions for an insurance portfolio represents an approximation of future cash flow for the claims payments, and there will always be an element of uncertainty in such calculations. Provision risks relate to this kind of uncertainty. The uncertainty depends on the nature of the risk. Risk with a short duration is less exposed to changes that will affect the future payments. Bodily injury claims are on the other hand very sensitive regarding changes in e.g. inflation and court awards. The effect of court awards are taken into account as soon as they are known. In cases when a judgement is not yet final and legally binding, the effect on the loss provision is based on a probability weighted estimate of the possible outcomes. Inflation risk is an underlying risk in most insurance products. The effect will be different, depending on the characteristics of each product and the terms and conditions that apply for the claims settlement. For lobs with nominal long-tailed provisions the effect of a one percentage point increase in inflation will be significant, proportional to the average duration (in number of years). Interest risk is a significant risk factor associated with Workers Compensation business in Denmark. This risk is an expression for loss/profit due to changes in market rates. There is both interest and inflation risk associated with the liabilities (technical provisions). The risk is hedged by use of interest and inflation swaps. The sensitivity analysis shows the effect of a change in inflation rate of one percentage point on the claim provision. The calculations do not include the effect of inflation swap. Table 5 Sensitivity analysis claims provision CHANGE IN INFLATION (+/- 1 %-POINT) NOK million 2010 2009 Private Norway 382.0 445.6 Commercial Norway 413.7 405.7 Total Gjensidige Forsikring asa 795.7 851.3 Nordic 397.2 381.8 Baltic 1.7 3.8 Total 1,194.6 1,236.9

gjensidige annual report 2010 99 Table 6a Analysis of claims development Gjensidige Group NOK million 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total gross Estimated claims cost At the end of the accident year 9,419.4 10,427.7 10,718.0 11,880.5 11,850.1 12,489.2 12,581.2 12,053.4 13,736.8 - One year later 9,398.9 10,468.0 10,645.9 11,843.8 11,719.6 12,518.7 12,664.3 11,993.6 - Two years later 9,441.0 10,480.5 10,701.3 11,830.3 11,652.7 12,414.1 12,577.1 - Three years later 9,457.9 10,531.5 10,620.2 11,782.4 11,487.7 12,356.8 - Four years later 9,506.5 10,489.9 10,561.5 11,630.9 11,476.8 - Five years later 9,484.8 10,421.0 10,450.0 11,621.4 - Six years later 9,460.6 10,374.2 10,463.1 - Seven years later 9,483.2 10,382.0 - Eight years later 9,470.1 Estimated amount as at 31.12.2010 9,470.1 10,382.0 10,463.1 11,621.4 11,476.8 12,356.8 12,577.1 11,993.6 13,736.8 Total disbursed 8,944.7 9,569.8 9,131.6 9,867.3 9,241.5 9,763.6 9,152.0 7,847.7 6,119.4 79,637.7 Claims provision 525.4 812.2 1,331.5 1,754.1 2,235.3 2,593.2 3,425.1 4,145.9 7,617.4 24,440.1 Prior-year claims provision 2,452.4 Gjensidige Baltic 189.0 Claims handling expenses 1,257.8 Total 28,339.3 Net of reinsurance Estimated claims cost At the end of the accident year 8,882.6 10,177.0 10,599.8 11,388.2 11,745.1 12,241.1 12,426.6 12,028.5 13,275.3 - One year later 8,816.8 10,198.3 10,519.8 11,349.9 11,611.2 12,271.7 12,520.3 11,968.9 - Two years later 8,887.6 10,214.9 10,550.8 11,333.0 11,503.0 12,150.5 12,438.4 - Three years later 8,890.8 10,272.8 10,474.0 11,291.9 11,332.1 12,097.4 - Four years later 8,919.6 10,235.4 10,406.3 11,141.0 11,316.8 - Five years later 8,915.1 10,170.4 10,294.1 11,130.7 - Six years later 8,916.9 10,132.1 10,313.3 - Seven years later 9,008.2 10,132.8 - Eight years later 8,925.9 perspektiv results Estimated amount as at 31.12.2010 8,925.9 10,132.8 10,313.3 11,130.7 11,316.8 12,097.4 12,438.4 11,968.9 13,275.3 Total disbursed 8,408.7 9,323.3 8,991.9 9,389.4 9,093.7 9,542.8 9,095.5 7,828.1 5,959.9 77,633.1 Claims provision 517.2 809.5 1,321.4 1,741.2 2,223.1 2,554.6 3,343.0 4,140.8 7,315.4 23,966.1 Prior-year claims provision 2,480.9 Gjensidige Baltic 175.0 Claims handling expenses 1,257.8 Total 27,879.9 The claims provision in Gjensidige Baltic as at 31 December 2010 is shown separately. The table below and on the next page show the figures for Gjensidige Forsikring asa. Table 6b Analysis of claims development Gjensidige Forsikring asa NOK million 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total gross Estimated claims cost At the end of the accident year 8,604.4 9,566.4 9,731.9 10,973.9 10,983.9 11,558.6 11,548.4 11,012.6 12,824.4 - One year later 8,580.5 9,613.9 9,665.1 10,927.4 10,850.2 11,552.3 11,663.9 10,928.1 - Two years later 8,600.8 9,613.6 9,682.2 10,890.6 10,780.9 11,536.7 11,593.6 - Three years later 8,613.7 9,651.1 9,631.1 10,857.8 10,717.5 11,494.0 - Four years later 8,635.6 9,607.1 9,565.7 10,822.6 10,719.4 - Five years later 8,612.2 9,540.3 9,505.3 10,819.9 - Six years later 8,584.4 9,510.6 9,519.3 - Seven years later 8,570.4 9,512.9 - Eight years later 8,551.3 Estimated amount as at 31.12.2010 8,551.3 9,512.9 9,519.3 10,819.9 10,719.4 11,494.0 11,593.6 10,928.1 12,824.4 Total disbursed 8,175.6 8,823.2 8,517.7 9,350.4 8,772.2 9,144.5 8,515.2 7,244.3 5,533.2 74,076.3 Claims provision 375.7 689.6 1,001.6 1,469.4 1,947.2 2,349.5 3,078.4 3,683.7 7,291.2 21,886.4 Prior-year claims provision 1,085.4 Claims handling expenses 1,221.2 Total 24,193.0

100 gjensidige annual report 2010 Table 6b Analysis of claims development Gjensidige Forsikring asa NOK million 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total Net of reinsurance Estimated claims cost At the end of the accident year 8,078.9 9,355.3 9,671.9 10,656.9 10,926.9 11,371.0 11,415.4 10,998.8 12,364.5 - One year later 8,014.0 9,385.5 9,598.1 10,608.3 10,790.8 11,369.8 11,525.5 10,914.4 - Two years later 8,062.2 9,388.7 9,586.6 10,571.7 10,677.6 11,348.8 11,460.5 - Three years later 8,061.3 9,433.2 9,539.2 10,544.4 10,609.5 11,310.2 - Four years later 8,063.7 9,393.9 9,466.3 10,510.6 10,607.1 - Five years later 8,057.7 9,331.8 9,405.8 10,507.0 - Six years later 8,055.5 9,310.7 9,425.8 - Seven years later 8,110.7 9,305.8 - Eight years later 8,022.4 Estimated amount as at 31.12.2010 8,022.4 9,305.8 9,425.8 10,507.0 10,607.1 11,310.2 11,460.5 10,914.4 12,364.5 Total disbursed 7,654.9 8,618.8 8,434.3 9,047.8 8,668.0 8,996.8 8,463.4 7,233.7 5,511.7 72,629.3 Claims provision 367.5 687.0 991.6 1,459.2 1,939.1 2,313.5 2,997.0 3,680.7 6,852.8 21,288.4 Prior-year claims provision 1,270.6 Claims handling expenses 1,221.2 Total 23,780.2 Parts of Gjensidige Sverige AB was reorganised as a branch of Gjensidige Forsikring ASA in the last quarter of 2009. As from 1 January 2010 the insurance operations in Denmark, except for Gjensidiges Arbejdsskadeforsikring, was reorganised as a branch of Gjensidige Forsikring ASA. As from fourth quarter 2010 the Commercial market insurance portfolio in Nykredit Forsikring was transferred to the Danish branch. The table is updated, also for previous years, to illustrate the development over time. LIFE INsuraNce Insurance risk The operations in Gjensidige Pensjonsforsikring as (gpf) is primarily concentrated around defined contribution schemes within the commercial markets segment and the management of premium reserves for paid-up pensions and individual fund pensions; the latter are not paid through premiums. In addition there is a risk coverage related to the company defined contribution schemes as well as a smaller share of plain risk insurances with disability coverage. Of the products that gpf offers, these insurance risks would primarily be disability and death with loss of income for the insured parties or surviving relatives, alternatively living longer leading to the risk that the accumulated pension is not sufficient to meet the pension payments for life. The risk for each individual contract is therefore the probability that the unforeseen event shall occur and the uncertainty of which insurance amount this particular person was covered for. In some contracts it says the insured party has the freedom to choose the sum insured and with that this creates a variation in the portfolio s risk. In other contracts the sum insured is predetermined, but this could either be a fixed sum or be a factor in relation to another variable quantity. This variable quantity in occupational pension contracts would typically be salary and the remaining time in service and that again creates a random variation in the portfolio s risk. In those particular portfolios well known methods for calculating the probability are used along with the theory for calculating which insurance premium is necessary to meet the future liabilities. Additionally for a large portfolio technical insurance provision methods will also be used to secure a good estimate of the future liabilities. For smaller portfolios during the start up period it will be sufficient, and necessary due to little data, to make use of simplified provision methods with a conservative estimate. The challenge for this type of business will be to collect sufficient risk premiums from customers to build up sufficient premium reserves for future liabilities. When a claim occurs, any inadequate premium reserve is not automatically covered by additional insurance premiums from the healthy population. The largest insurance risk that gpf faces is if the actual pension payments exceed the amount that is reserved to cover the committed insurance liabilities. This would occur if the disablement among the insured parties is higher than provided for, if the mortality rate rises amongst the insured parties that have dependants covered or if the retirement pensioners live longer than expected. This will also occur if the majority of those disabled have pre-agreed pension payments that are higher than the average pension payments in the insurance portfolio. It is in the nature of insurance that the events which the insured party has covered themselves for hit randomly, both in respect of who is affected and which cover is agreed, and this will give variations within a probability interval from year to year. For the insurance business to be able to operate with a sufficient degree of security the portfolio should be both of a certain size and be sufficiently homogeneous in relation to the spread of risk between the best and the worst risk and between the smallest and greatest risk. The bigger the portfolio is and the more homogeneous the particular risk is, the greater the probability will be to meet the future liabilities. In addition to the discussed factors regarding the probability of disability, mortality and longevity, the concentration around given occupational groups or a few, but large, risks would have a negative impact on the insurance profit. The mortality risk in the products is mainly related to the surviving relative s payments associated with defined contribution schemes, resulting in a spouse, cohabitant or child pension. The surviving relative s pension is mainly associated with payments into a contribution plan above the statutory two per cent minimum contribution for compulsory occupational pensions. There is also an exposure against the surviving relative s payments in the paid-up pension schemes, but by a clearly lesser extent measured by the insured amount for each insured party. The surviving relative s payments under defined contribution schemes mostly have a limited payment period, whilst the surviving relative s payments under paid-up pension schemes receive payments for as long as the pension recipient lives (for life).

gjensidige annual report 2010 101 The table below shows the number of members and contracts divided between compulsory occupational pensions and other defined contribution pensions. Table 7a Number of members and contracts 2010 Number of members Number of contracts The actual claims paid in 2010 are still of a modest size and amounted to nok 15 million. The IBnr provisions at year end 2010 are nok 124 million, 53 per cent of the total claims provisions. The provision for reported and settled claims is based on the expected cash value of future liabilities and amounts to nok 109 million, 47 per cent of the total claims provisions. The actual pension payments and the corresponding claims provisions are within the expected payment amounts. Compulsory occupational pensions 59,718 15,562 Other defined contribution pensions 35,067 7,054 Total 94,785 22,616 Compulsory occupational pensions 80 % 86 % Other defined contribution pensions 47 % 39 % Table 7b Number of members and contracts 2009 Number of Number of members contracts Compulsory occupational pensions 52,886 13,388 Other defined contribution pensions 21,845 4,670 Total 74,731 18,058 Compulsory occupational pensions 71 % 74 % Other defined contribution pensions 29 % 26 % Since most contracts are based on the regulations for defined contribution schemes with account payments over a ten year period after pensionable age is reached, the Company has a very small exposure in longevity risk under ordinary occupational pension schemes. Most paid-up pensions that are transferred to the Company pay a retirement pension for life and thus have a longevity risk. The risk tariff for this cover is also calculated on the K2005 basis and includes safety margins in accordance with orders from the Financial Supervisory Authority of Norway (Finanstilsynet). The disability risk is related to the contribution exemption from agreed annual contributions for individual members as well as the disability pension. Since the contribution exemption is a compulsory cover under compulsory occupational pension schemes, the largest part of this cover will numerically be in relation to pension contributions based on two per cent of salary. Correspondingly, pension arrangements above the minimum statutory requirements have a larger cover. Disability pensions are attached to both defined contribution schemes as well as paid-up pension schemes. The risk premium for the disability risk is based on an internal risk tariff prepared in co-operation with Gjensidige Forsikring and is based on both national claim figures (National Insurance) and our own claim figures, primarily in Gjensidige Forsikring. For paid-up pension schemes there is in addition a yearly guaranteed minimum rate of return which on average amounts to 3.6 per cent at the end of 2010 (3.7 per cent in 2009). The number of individuals who are exposed to mortality risk and/or longevity risk is very modest compared to disability risk exposure. The insurance risk as at 31 December 2010 is considered as satisfactory and the uncertainty around cases which have not yet been reported is safeguarded by the claim provisions. In addition the Company has a satisfactory reinsurance arrangement in place with Gjensidige Forsikring asa, which protects against large loss fluctuations. Gjensidige Forsikring asa has a considerable portfolio within both individual and group personal risk with disability risk, and through close co-operation with the specialist research departments in this company one will discover early changes in the trend of disability development both in society and in the insurance portfolio. Both actual payments and claims provisions have increased during the last years and are expected to increase in volume over the next few years. This is both due to significant growth in the portfolio volume and that the percentage growth in the number of risk years is high during the first few years since the start of the company. The number of retirement pensioners is still expected to be very low with very modest payments. The payments will either come from the savings account for defined contribution schemes or from the transferred premium reserves from other companies for paid-up pensions and individual fund pensions. Pension insurance sensitivity analysis Gjensidige Pensjonsforsikring has been running their business for five years, which is a very short period compared to other participants within pension insurance. Although the portfolio is clearly growing, the number of insurance cases is still very low. The number of reported disability cases has increased throughout 2010, which is expected since the pension scheme population has grown and the number of risk years has increased from four to five. But it is still too early to be able to do an extensive analysis to see whether the calculated premiums and claim occurrences are sufficient to cover the future liabilities. The mortality risk coverage applies to members of an occupational pension scheme, and these give a basis for a potential spouse, cohabitant or child pension. The period of risk is limited to the member s period of service up to the maximum age limit which is 67 years. Specific information about the member s family situation is not obtained at the time of signing for the pension. The premium is therefore calculated using assumptions about mortality, civil status, number of children as well as knowledge about their age and gender. For Gjensidige Pensjonsforsikring as these calculations are based on the calculation basis - labelled K2005, which the insurance industry in Norway has developed jointly with the Norwegian Financial Services Association (Fno). The agreements with companies are also of a one year disposition such that the risk premium can be modified at each annual renewal. Overall, this gives a robust premium basis with limited probability that the accumulated premium and allotted claim provisions will not be sufficient to cover future liabilities. Since the portfolio is still of a limited size most of the annual risk premium is put aside into the claim provision. Each year s risk will be evaluated after some time in relation to reported insurance cases and expected reporting patterns. Since these are business related pension schemes it is assumed that the time from when an insurance case occurs, in this case a death, to the case being reported to the Company will be minimal. The sensitivity for this part of the insurance portfolio will therefore be proportional to the factor one chooses to use as claim provision compared to the year s risk premium. In addition there is minor mortality risk coverage within the paid-up policy portfolio. perspektiv results

102 gjensidige annual report 2010 The issue of longevity, that only affects the Company s paid-up policy portfolio for future retirement pensioners, has an inverted dependency on the mortality rate in the insurance portfolio compared to the discussed surviving relatives coverage. The Company s risk here is that the retirement pensioners who have pre-agreed lifelong retirement pensions will live longer than assumed in the calculations. Also here the mortality rate basis K2005 is used, but is based on survival probabilities and safety margins the other way. In addition, the Financial Supervisory Authority of Norway has also stated a need here for additional safety margins. The adequacy of these margins will continually be evaluated through joint mortality analyses in the industry. Last years analyses shows that the calculation basis on a long term view does not contain the safety margins originally determined, and the industry has therefore initiated a reassessment of the K2005 calculation basis. The Financial Supervisory Authority of Norway (Finanstilsynet) is informed on the development. A potential strengthening of the reserves will be financed through the profit the company has in its portfolio, alternatively through use of equity. The liabilities for the paid-up policy portfolio are long-term and the main part of the liabilities stretches over a period of 50 to 60 years. The figure below shows the undiscounted expected liabilities in the paid-up policy portfolio, based on the current portfolio, in intervals of five years. Figure 6 Cash flow paid-up policies NOK million 800 700 600 500 400 300 200 100 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 Years The disability risk applies to the disability pension and/or the exemption from paying the agreed annual contributions in accordance with the pension agreement. The payments will end no later than the date normal retirement age is reached, which is usually 67 years. Any claims will come after a 12 month continuous period of sick leave. The risk amount is then dependent on the agreed pension payments and the total payment period up to retirement age. Here Gjensidige Pensjonsforsikring as use assumptions from the same calculation basis K2005 as well as their own developed disability tables based on the recently updated Norwegian disability statistics. The tables are developed in close co-operation with Gjensidige Forsikring asa who has a considerable insurance portfolio with disability risk, and further takes into consideration the difference between the disability in the population compared to the disability in the portfolio. The insurance portfolio is usually subject to one or another form of risk evaluation when taking over a disability risk. For occupational pension schemes a separating of the employers into different risk groups by business type is also used. Those customers who take out individual disability pensions are subject to ordinary rules concerning individual risk evaluation based on the insured party s personal statement of health. The number of insured parties whom receive some form of disability benefit, either disability pension and/or exemption from agreed contributions, is still very modest compared to the number of insured parties. The simplified provision methods are therefore also used here due to the fact that most of the year s risk premium is put aside for claim provision. Each year s risk will be evaluated after some time in relation to reported insurance cases and expected reporting patterns. Since most of this particular disability risk is related to business related pension schemes it is assumed that the time from when an insurance case occurs, in this case a disability which has lasted longer than 12 months, to the case being reported to the Company will be minimal. For insurance policies where the customer has reported a disability claim and disability pension or exemption from agreed contributions is accepted, the Company will have a claim provision to cover the present value of future liabilities until the end of the agreed period (retirement age) or until the person recovers from the disability status. The calculation of the latter probability is difficult, and in practice the claims provision is reduced by a reactivation amount. Sensitivity in the disability claims provisions will be related to this assumption. In this context the assumptions on mortality rates have less influence. REINsuraNce Gjensidige purchases reinsurance to protect the Group s equity capital and reinsurance is thus a capital management tool. The same models and methodology, as used for evaluation of alternative asset allocations and the internal risk based capital allocation, are also used to analyze and purchase reinsurance. The maximum retention level is set by the Board of Directors, and the Reinsurance department is responsible for purchasing and follow-up of reinsurance activities. Gjensidige s reinsurance programme mainly consists of non-proportional reinsurance. The maximum retention level for the Group was nok 250 million in 2010 unaltered from 2009. As a general rule Gjensidige purchases reinsurance to limit any single claim or event per insurance product to nok 100 million. 2010 provided a market with premium reductions in some segments, and reinsurance protection was purchased with a lower retention, so that the retention level varies from nok 20 to 100 million, depending on line of business. Decisions concerning the reinsurance programme are based on analysis of exposure, claims history, model simulations and Gjensidige s capital structure. Gjensidige Forsikring asa provides a corporate function with regard to reinsurance. Gjensidige Forsikring is acting as reinsurer for the subsidiaries, and their exposure is included in the outward reinsurance covers for the Group. The reinsurance programme for property insurance also includes the cooperating mutual fire insurers. The subsidiaries reinsurance programmes generally have a lower retention, due to their smaller size and capitalization than Gjensidige Forsikring asa. The difference between the retention levels is held for own account by Gjensidige Forsikring asa. In Norway the exposure to natural perils disasters is handled through the compulsory membership in the Norwegian Natural Perils Pool. Through this arrangement, Gjensidige is exposed to the market share of the total claims for the Norwegian market as a whole. On behalf of its members the pool has its own reinsurance programme in place, which further reduces the risk exposure. As in 2009, Gjensidige participates with ten per cent on the pool s programme in 2010. This exposure is included in the outward reinsurance programme, resulting in synergy effects, economies of scale and diversification in Gjensidige s reinsurance programme. In the other countries Gjensidige is operating, natural perils claims are included in the ordinary property reinsurance covers. An event resulting in claims in several countries where Gjensidige has its business will be aggregated into one event in respect of reinsurance.

gjensidige annual report 2010 103 MANageMENT of financial risk general INsuraNce operations Financial risk is a collective term for various types of risk related to financial assets. The different types of financial risk are described in greater detail below. Operational risk is monitored and controlled as well. Equity price risk is defined as a loss in value resulting from a fall in equity prices. This is analogous to real-estate price risk. See amounts below in the stress test and sensitivity analysis. Interest-rate risk is defined as the loss in value resulting from a change in interest rates and is viewed both from the asset-only perspective and in relation to the interest-rate sensitivity of the liabilities. The Board of Directors set a limit of nok 720 million on the interest-rate risk in the total fixedincome portfolio (excluding bonds held to maturity and the swaps in Gjensidiges Arbejdsskadeforsikring) for 2010 (given a 100 basis points shift in the yield curve) for the general insurance operations. Foreign-exchange risk is defined as the loss resulting from a movement in exchange rates. Generally, foreign-exchange risk in the investment portfolio is hedged close to 100 per cent, within limits of +/- ten per cent per currency, except for smaller mandates where active currency management is a part. In terms of concentration risk, the main risks for the Group are the investments in Storebrand and SpareBank1 sr-bank and the exposure to office properties in the Oslo area. Concentration risk is further analysed under the various market risk factors. Table 8 Asset allocation general insurance 31.12.2010 31.12.2009 NOK million Per cent NOK million Per cent Money market 8,274.8 15.8 % 10,121.8 20.0 % Bonds held to maturity 13,910.3 26.6 % 15,178.4 30.0 % Loans and receivables 3,903.8 7.5 % 1,364.7 2.7 % Current bonds 11,522.5 22.0 % 11,194.1 22.1 % Equities 2,500.3 4.8 % 1,827.6 3.6 % Associates 4,275.5 8.2 % 3,780.9 7.5 % Real estate 6,445.1 12.3 % 6,030.5 11.9 % Hedgefunds 756.6 1.4 % 532.5 1.1 % Other 1 758.1 1.4 % 638.6 1.3 % Total 52,347.0 100.0 % 50,669.1 100.0 % 1 The item primarily consists of the discounting effects of insurance obligations in Denmark, mismatches between interest rate and inflation adjustments on the liability side in Denmark versus interest rate and inflation hedging, and currency hedging of Gjensidige Sverige and Gjensidige Baltic. Carrying amount corresponds to the market value of interest rate and inflation swaps in Denmark. perspektiv results Credit risk is defined as the loss arising from an issuer defaulting on its obligations or because of increased risk premiums for bonds with credit risk. Credit risk is managed both via credit lines for named counterparties, from lines based on official credit ratings and from diversification requirements on mandates for corporate bonds. Credit risk in relation to reinsurance is handled through minimum rating requirements for Gjensidige s reinsurance companies and close follow-up of receivables. Liquidity risk is defined as the inability to meet payments at due date, or the need to realize investments at a high cost to meet payments. The Board of Directors has set minimum limits for the amount of assets to be realized without undue transaction costs within various time frames. The insurance operations are exposed to these types of risk through the Group s investment activities, and they are managed at the aggregate level and handled through guidelines for capital management and investment strategies that have been drawn up for the Gjensidige Group and its subsidiaries and through resolutions in the Group s credit committee. There has not been any material changes in Gjensidige in the processes used to manage risks from previous periods. The investment strategy and other risk management policies are approved by the Board of Directors in each company, but are closely coordinated with the parent company s overarching policies. The general rule is that the asset allocation in the subsidiaries in general insurance will only be used to ensure the technical reserves against interest and foreign-exchange risk with excess funds invested in interest-bearing securities with low risk. Exposures to market risk are recognised in the balance sheet of Gjensidige Forsikring asa. This is done in order to improve the efficiency of the investment management and capitalization in the Group. The table below gives the main overview of the asset allocation for the insurance business at year-end 2010 and 2009. The actual allocation will vary thorough the year and follow movements in the market, tactical allocation and risk situation. In 2010, the allocation to money markets fell and bonds held at amortized cost rose. Allocation to equities, real estate and hedge funds increased, and market values of associates increased. Gjensidige s investment strategy is determined annually by the Board of Directors. Here the Board of Directors sets upper and lower limits per asset class, the overall risk tolerance related to the financial results and specific limits for interest rate, liquidity and foreign-exchange risk. The asset allocation must be within these limits at all times. The main goal of the asset allocation is to optimize the balance between expected financial income and risks. The starting point is the insurance operations need to balance expected future outflows against inflows from investments, while other funds in the insurance operations are invested to optimize return on equity in a well-diversified manner given the approved willingness to take risks. The trend in the financial results is measured continuously relative to the targets and risk limits set by the Board of Directors. In the event of a significant negative development in the financial results, the limit for investments in risky assets will be lowered. The development in the financial results measured against the risk limit is reported regularly to group management and the Board of Directors. STRESS testing Stress testing is performed on the value of the investment assets relative to the market, credit and foreign-exchange risk as well as to negative scenarios for the insurance activities measured relative to the buffer capital (defined as capital in excess of legal minimum requirements) and reported regularly to the Board of Directors. The purpose of the stress test is not to analyze the effect on profit or loss or on recognised equity, but rather the effect on the capital buffer. This stress test based on figures at year-end is shown below (group figures). The capital buffer here is relative to the capital adequacy requirement for the Gjensidige Group, which is calculated according to Norwegian gaap. For purposes of capital adequacy, Gjensidige s stakes in Storebrand and SpareBank1 sr-bank are consolidated so that any decline in the share price of these enterprises will not affect the capital buffer. Their results are entered in Gjensidige s accounts using the equity method, and in this way they affect the Company s and the Group s capital buffer situation. Furthermore, consideration is given to the underlying fluctuation risk for the insurance results only to the extent that a weakening of the combined ratio will bring it over 100

104 gjensidige annual report 2010 per cent. Finally, the risk in the subsidiaries outside general insurance (Gjensidige Pension and savings, Hjelp24 and Gjensidige Bank) are included by assuming a reduction of ten percentage points in their return on equity and including the losses that this may entail. The large capital surplus was representative for the situation throughout the year, although the precise figures will vary along with changes in asset allocation and year-to-date profit. Table 9 - Stress test financial assets Decrease in value NOK million Scenario 2010 2009 Assets/risk Equities 20% drop in value (500.1) (365.0) Interest rate risk 100 bps 1 change in inter. (274.1) (347.2) Property 12% drop in value (773.4) (723.7) Hedgefund 12% drop in value (90.8) (63.9) Currency 10 % change towards nok (87.2) (25.4) Fixed income portfolio - Rating aaa 0.15 % (31.5) (16.0) aa 0.15 % (7.3) (5.3) a 0.62 % (26.7) (46.9) BBB 0.75 % (20.4) (33.3) BB 2.03 % (16.8) (43.4) B 3.36 % (29.4) (54.8) CCC or lower 6.72 % (2.1) (32.4) Not rated 1.20 % (66.3) (181.8) Underwriting result 3 percentage points weaker CR Claims provision 2 % increase (567.4) (517.1) Catastrophe nok 135 million (135.0) (135.0) Storebrand og SpareBank1 sr-bank 1,3 std.deviation (422.3) (422.3) Reinsurance receivables 2 % loss (10.1) (5.8) Result subsidiaries (gps and Bank) 10 % drop in roe (196.5) (281.4) Total decrease in value of stress test (3,257.5) (3,300.7) Buffer capital 6,894.1 8,794.6 Capital/surplus in stress scenario 3,636.6 5,493.9 1 bp = basis points EQuitY price risk In 2010, Gjensidige s equity portfolio increased from the previous year. The largest exposures are to Storebrand, SpareBank1 sr-bank and underlying companies in private equity funds. The concentration risk is shown in the table below. The majority of the geographic exposure is to Norwegian shares. Table 10a Largest equity exposures 2010 NOK million 31.12.2010 Company Storebrand asa 3,287.8 Sparebank1 sr-bank 958.9 Spring Energy Norway as 49.9 at Group 40.2 RenoNorden Holding as 35.2 Total five largest 4,372.1 Total equities 6,775.8 Table 10b Largest equity exposures 2009 NOK million 31.12.2009 Company Storebrand asa 2,903.5 Sparebank1 sr-bank 877.4 Orkla 25.3 Apply Group as (Prev. Sørco Gruppen as) 23.4 Elexia Nordic AB 22.6 Total five largest 3,852.2 Total equities 5,608.5 To illustrate the sensitivity of the equity portfolio to a fall in equity prices, the table below shows the effect of a possible scenario. The figures show the effect on equity, but do not take into account taxation effects. Consideration is given to the fact that Storebrand and SpareBank1 sr-bank were recognised as an associated company as at 31 December 2010 so that a drop of ten per cent in the share price will not result in an impairment of the value in the balance sheet, and the items are excluded from the sensitivity calculation. As shown in the table, the sensitivity increased significantly since 2009. As previously mentioned, this was attributed to an increase in the shareholdings. Table 11 Sensitivity analysis equity portfolio NOK million 31.12.2010 31.12.2009 10 per cent drop in equity prices (250.0) (182.5) Excluding investment in Storebrand asa and SpareBank1 sr-bank. Gjensidige Forsikring invests in a number of private equity funds as well as fund-of-funds. The focus has so far been on the Nordic region, and Gjensidige will seek to assume an active role through a place on the board or advisory committees of the different funds. The portfolio consists of a mixture of venture and buy-out strategies. For investments outside the Nordic region, Gjensidige will generally seek to invest through fund-of-funds. Table 12a Largest private equity funds 2010 NOK million 31.12.2010 Fund Fsn Capital ii lp 129.3 HitecVision Private Equity V lp 106.4 HitecVision Private Equity IV lp 85.6 Altor Fund ii lp 83.2 Northzone V KS 61.5 Total five largest 466.1 Total private equity 1,134.9 Table 12b Largest private equity funds 2009 NOK million 31.12.2009 Fund HitecVision Private Equity IV lp 79.1 Fsn Capital ii lp 76.9 Altor Fund ii lp 54.5 Northzone V KS 53.1 Norvestor IV lp 51.8 Total five largest 315.4 Total private equity 817.7 In addition to the invested amounts, Gjensidige had committed capital, not invested, amounting to nok 581 million as at 31 December 2010. INterest-rate risk Within the Group s insurance companies, overall exposure to interest-rate risk will be reduced by matching a portfolio of fixed income instruments to the overall duration and the payout pattern of the insurance liabilities. Since the insurance liabilities are generally not discounted in the balance sheet, this implies that from an accounting perspective insurance liabilities will be exposed to changes in inflation (but not directly to interest rates). An economic perspective, however, argues for hedging interest-rate risk, because the present value of the provisions will be exposed to changes in the real interest rate. From an accounting perspective, the risk from choosing this hedging strategy is reduced, because a major part of the bond portfolio

gjensidige annual report 2010 105 is classified as held to maturity or loans and receivables (hereafter only referred to as the amortized cost portfolio). Furthermore from an economic perspective the inflation risk is partly reduced since a part of these bonds carries a coupon linked to the trend in the consumer price index. In one of the Danish operations, Gjensidiges Arbejdsskadeforsikring, the long-tail Workers Compensation line of business is hedged against changes in the real interest rate through swap agreements. The realinterest-rate risk relates to outstanding premium- and claims provisions of approximately nok 3,500 million (discounted value), where a large percentage of the claims are paid out as annuities, the payments of which are linked to a Danish variant of the Cpi (yearly increase in Danish workers compensation awards - determined by the authorities, a function of the wage developments). The risk to the present value of these annuities is hedged through a series of swap agreements stretching out over 40 years and covering inflation and interest-rate risk separately so that the net real-interest-rate risk is removed. The swap agreements are reset once a year and security is provided for outstanding market value between the parties, which reduces the counterparty risk and results in a limited book value. The fixed-income portfolio in Gjensidiges Arbejdsskadeforsikring is invested with a low duration. The table below shows the maturity profile of the Group s fixed-income portfolio. It does not include the above-mentioned swap agreements, which have a limited carrying amount, but instead the actual fixedincome portfolio in Gjensidiges Arbejdsskadeforsikring. Figure 7a - Payout pattern insurance liabilities, Gjensidige Group NOK million 12,000 10,000 8,000 6,000 4,000 2,000 0 The next graph shows the corresponding payout pattern for Gjensidige Forsikring asa. The average duration for Gjensidige Forsikring asa is slightly shorter than for the Group. Figure 7b - Payout pattern for insurance liabilities, Gjensidige Forsikring asa NOK million 12,000 10,000 8,000 6,000 1 2 3 4 5 6 7 8 9 2010 2009 10 11 12 13 14 15 16 17 18 19 20 >20 Years 2010 2009 perspektiv results Table 13 Maturity profile (number of years) fixed income portfolio NOK million 31.12.2010 31.12.2009 Maturity 0-1 15,153.8 14,949.5 1-2 4,197.4 5,477.1 2-3 5,547.0 3,211.7 3-4 4,191.3 4,771.3 4-5 2,676.6 3,927.1 5-6 1,312.1 1,089.7 6-7 1,125.8 1,089.6 7-8 1,399.0 986.9 8-9 891.1 1,128.3 9-10 158.8 210.8 >10 958.5 1,016.8 Total 37,611.4 37,858.8 Furthermore, the interest-rate sensitivity of the fixed income portfolio is shown in the table below. This table does not include the amortized cost portfolio, and the effect of the swap agreements in Gjensidiges Arbejdsskadeforsikring have not been included either because they have a reciprocal effect on the liabilities. The effect on profits and equity is the same, and tax effects have been disregarded. Table 14 Sensitivity fixed income portfolio NOK million 31.12.2010 31.12.2009 100 bps parallell shift up (274.1) (347.2) The following graph shows the expected payout pattern for the Group s premium and claims provisions at year-end 2010 and 2009 respectively. Approximately one third of the provisions are expected to be paid out within one year, and the average duration is about 3.2 years. A portfolio of fixed income instruments will match these cash flows, but the Group has no formal policy for the maximum allowable deviation. 4,000 2,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 >20 Years PROPERTY price risk Real estate constitutes a significant part of the portfolio of Gjensidige Forsikring. The motivation for investing in real estate is primarily that it enhances the risk-adjusted return of the asset portfolio, through an expected rate of return that lies between bonds and equities, and that there is a modest correlation to both of them. The Group owns most of its properties directly, although a small part of the portfolio is invested in property funds outside of Norway. In addition to the amounts invested through funds, an additional nok 124.7 million is committed, but not called upon. The management of the directly owned real estate portfolio is carried out in the wholly owned subsidiary Oslo Areal. The portfolio consists both of property for own use and investment properties. The real estate portfolio has its largest concentration in offices in the Oslo area, but also has offices in other major cities in Norway as well as a substantial holding of shopping centers. In addition there is a property for own use and an investment property in Denmark. Table 15 Largest real estate investments NOK million 31.12.2010 31.12.2009 Total ten largest properties 4,007.8 3,674.6 Total property 6,445.1 6,030.5

106 gjensidige annual report 2010 HEDGE funds Hedge fund is a common term for funds that invest in most types of asset classes with few limitations on the use of derivatives, shorting or leverage in order to earn a return that is partly independent of (has a low correlation with) traditional market indices. Gjensidige utilizes hedge funds to take out active risk in the individual asset classes and to take out allocation risk between the individual asset classes and/or risk premiums. Both fund-of-funds and individual funds are used. The fund-of-fund manager will perform the selection and follow-up of the underlying hedge funds, thus reducing operational risk. Table 16a Largest hedge funds 2010 NOK million 31.12.2010 Winton Futures Fund-Lead Series 180.0 Sector Polaris 144.2 The Winton Evolution Fund 112.9 Sector EuroPower Fund Class A eur 81.0 Sector Healthcare - A usd 79.3 Total five largest hedgefunds 597.4 Total hedgefunds 756.6 Table 16b Largest hedge funds 2009 NOK million 31.12.2009 Horizon Tactical Trad usd-b 137.1 The Winton Evolution Fund 107.7 Sector Healthcare - A usd 74.4 Sector EuroPower Fund Class A eur 72.0 Sector Speculare IV Fund Class A usd 51.4 Total five largest hedgefunds 442.6 Total hedgefunds 532.5 FOREIGN EXchaNge risk Foreign-exchange risk is defined as the financial loss resulting from a fluctuation in exchange rates. Generally, foreign-exchange risk in the investment portfolio is hedged close to 100 per cent, within permitted limit of +/- ten per cent per currency, except for smaller mandates where active currency management is a part. The parent company hedges its investments, but not future income, in subsidiaries against foreign-exchange risk. For Gjensidige Baltic, the hedging is performed in eur because periodically there is low liquidity in the market for LVL. In order to counteract the risk that then arises, a percentage of Gjensidige Baltic s interest-bearing papers are invested in eur. For Tennant Forsäkringsaktiebolag, the hedging is in sek. In both cases, the results of the hedging are recognised in the income statement while the change of value in the hedged object is recognised in other comprehensive income. In the Danish subsidiaries, Nykredit Forsikring and parts of Fair Forsikring, hedge accounting is employed where only the inefficient part of the hedging is recognised in the income statement. This gives a more consistent accounting of hedging and the hedged object. The hedging is carried out with currency swaps, where the amount is adjusted quarterly. The Group underwrites insurance in the Scandinavian and Baltic countries, so it has insurance liabilities in these currencies. The foreignexchange risk at both the group and company levels is generally hedged by matching technical provisions with investments in the corresponding currency. In Gjensidige Baltic, there are investments in eur-denominated interest-bearing papers that are not equivalent to liabilities in eur. The table below shows the foreign currency exposure by currency type. The gross position shows the exposure after taking into account the distribution of the insurance liabilities among different currencies and includes the investments in the subsidiaries that are entered in the parent company s accounts. In the net position column, the hedges of the subsidiaries are included. A ten per cent strengthening of nok against all other currencies will have a positive effect on equity of about nok 97.7 million. Since the conversion effect related to subsidiaries is recognised in other comprehensive income, whereas the currency hedging for Gjensidige Baltic and Tennant is recognised in the income statement, the effect on profit or loss will be positive and amount to nok 87.2 million (nok 16.9 million for 2009). In the opposite case, if there is a ten per cent weakening of nok against all other currencies, the effect on the basis of the situation as at 31 December 2010 will be about the same amount, but with an opposite sign, provided that all other variables are held constant. Currency transactions are performed within strictly defined limits and are employed in both the ordinary management and to hedge financial instruments. The table below shows both gross and net positions. Currency hedging (not including the hedging of investments in subsidiaries) is done by means of forwards or swaps, and currency position is monitored continuously against exposure limits per currency. Table 17 Foreign currency exposure NOK million Gross position in currency Gross position in NOK Currency contracts Net position in currency Net position in NOK AUD 0.2 Cad 0.4 2.5 0.4 2.5 CHF 0.1 0.8 (0.1) 0.2 DKK 4,850.0 5,303.7 (4,946.7) (96.7) (105.8) eek (69.1) (36.0) (69.1) (36.0) eur 308.1 2,524.3 (300.7) 7.4 57.8 GBP 0.7 6.5 (1.0) (0.3) (2.6) LVL (1.5) (17.0) (1.5) (17.0) ltl (29.6) (70.0) (29.6) (70.0) jpy 5.2 0.4 0.7 5.9 0.4 pln (6.1) (12.6) (6.1) (12.6) sek 120.9 106.1 (174.8) (53.9) (47.2) usd 474.4 2,783.6 (463.3) 11.1 64.4 Total 10,592.1 (165.9) CREDIT risk Gjensidige is exposed to credit risk, i.e. the risk that a counterparty is not able or willing to settle its liability at due date or the risk that the credit spreads will increase (credit risk premium). The Group is primarily exposed to credit risk in the investments in the insurance companies, and through receivables from the insurance customers and reinsurers. Credit risk in Gjensidige Bank will be covered in a separate section. For investments, risk limits are set for credit risk in several ways. As a point of departure there is a credit limit on designated counterparties. For issuers with an official credit rating from a recognised rating agency, this is generally utilized as a criterion. The list of credit limits is approved by the Deputy Ceo and employed for all separate mandates and for derivative counterparties. In addition, the board-approved asset

gjensidige annual report 2010 107 allocation sets limits on global bonds, both bonds with high financial strength ratings (investment grade) and other bonds (high yield). The Group s total fixed-income portfolio of nok 37,611.4 million as at 31 December 2010 (including the amortized cost portfolio, other bonds, certificates and deposits) consisted of nok 7,559.9 million issued by government sector entities and nok 30,051.5 million by non-public entities. The majority of the latter category was financial institutions. The percentage issued by government sector entities increased from the level in 2009. The distribution is shown in the table below. Table 18 Allocation of fixed-income portfolio per sector 31.12.2010 31.12.2009 Government 20.1 % 14.5 % Banks and financial institutions 62.1 % 65.6 % Corporates 17.8 % 19.9 % Total 100.0 % 100.0 % The following tables show the allocation of the fixed-income portfolio by rating category at year-end in 2010 and 2009 Table 19a Fixed-income portfolio per rating category NOK million 31.12.2010 31.12.2009 Table 20a Ten largest issuers 2010 NOK million 31.12.2010 Issuer Den Norske Stat 2,499.2 Nykredit Totalkredit 1,779.8 Realkredit Danmark 1,508.6 DnB nor Bank 1,406.0 Danske Bank 1,367.3 Nordea Kredit 953.5 Statkraft 937.3 Barclays Bank Plc 734.5 Oslo kommune 621.1 UBS ag Jersey Branch 573.6 Total ten largest issuers 12,380.8 Total fixed income portfolio 37,611.4 The overview of the largest issuers also includes the fixed-income portfolio for gpf and Gjensidige Bank because the individual counterparty risk is monitored at the group level. Total fixed-income portfolio is only for general insurance. Table 20b Ten largest issuers 2009 NOK million 31.12.2009 perspektiv results Rating aaa 11,079.4 8,642.9 aa 5,513.9 6,457.8 A 9,548.0 10,393.8 BBB 2,276.6 2,815.0 BB 403.4 729.1 B 323.5 590.3 CCC or lower 365.0 196.7 Not rated 8,101.6 8,033.3 Total 37,611.4 37,859.0 Table 19b Fixed-income portfolio per rating category, internal rating included NOK million 31.12.2010 31.12.2009 Rating aaa 11,286.2 9,076.3 aa 6,545.6 7,016.4 A 11,435.0 12,350.4 BBB 5,421.8 6,068.3 BB 403.4 729.1 B 323.5 590.3 CCC or lower 365.0 196.7 Not rated 1,830.9 1,831.5 Total 37,611.4 37,859.0 A large part of the Norwegian fixed-income portfolio consists of issuers without a rating from an official rating company. However, the asset managers and brokerages conduct their own internal rating, assigning rating categories in the same way as the rating companies. For completeness, the second table includes the allocation also using the internal rating of Gjensidige s main asset manager, Storebrand Kapitalforvaltning. The following tables show the largest issuers as at 31 December 2010 and 31 December 2009 respectively Issuer Den Norske Stat 3,893.6 Danske Bank 2,062.2 Nykredit Realkredit 1,861.5 DnB nor Bank 1,506.6 Dansk Landbrugs Realkreditfond 990.7 Realkredit Danmark 912.4 Brf Kredit 773.1 Barclays Bank Plc 738.6 Svenska Handelsbanken Stockholm 638.3 UBS ag Jersey Branch 569.3 Total ten largest issuers 13,946.3 Total fixed income portfolio 37,859.0 CREDIT risk IN the INsuraNce operations The table below presents the age distributions of the receivables arising out of direct insurance operations and of the reinsurance receivables. Table 21 Age distribution receivables insurance NOK million Direct inurance Reinsurance 31.12.2010 Installments not due 3,020.0 31.6 <35 days 282.2 1.2 35-90 days 102.6 > 90 days 135.7 11.8 Total 3,540.5 44.6 31.12.2009 Installments not due 2,871.9 1.9 <35 days 289.8 30.9 35-90 days 90.8 8.1 > 90 days 92.1 21.0 Total 3,344.6 62.0 Reinsurance is used to manage insurance risk. This does not, however, discharge Gjensidige from any liability as primary insurer. If a reinsurer fails to pay a claim for any reason, Gjensidige remains liable for the

108 gjensidige annual report 2010 payment to the policyholder. The creditworthiness of reinsurers is considered by reviewing their financial strength prior to finalization of any contract. As a general requirement, all reinsurers need to be rated A- or better by S&P (or the equivalent from other rating agencies) when entering into the contract with Gjensidige. The figure shows the breakdown of the purchased reinsurance capacity for 2010 and 2009; i.e. the rating of the reinsurers that would have been drawn in if the losses had occurred. Figure 8a Potential credit exposure reinsurance per rating category 2010 No rating 1.0% AAA 0.3% AA 43.6% A 55.1% Figure 8b Potential credit exposure reinsurance per rating category 2009 AAA 2.8% AA 39.7% A 57.5% The following table provide an overview of the breakdown of reinsurance receivables and the reinsurers share of outstanding claims per rating category. The exposure in the not-rated category primarily relates to run-off business and is broken down among a large number of counterparties. In many cases the companies are now in run-off and do not have a rating anymore. Table 22 Reinsurance receivables and reinsurers share of claims provisions 2010 2009 Rating NOK million Per cent NOK million Per cent aaa 2.8 0.5 % 3.9 1.4 % aa 232.5 46.1 % 114.7 39.7 % A 194.1 38.5 % 110.4 38.2 % BBB 0.2 0.0 % 0.4 0.1 % BB 0.6 0.1 % 0.7 0.2 % B 0.6 0.1 % Not rated 73.2 14.5 % 58.6 20.3 % Total 504.0 100.0 % 288.7 100.0 % LIQuiditY risk For most general insurers, the liquidity risk is quite limited. Premium income is paid up front, and claims are paid out at a later stage. Future payments are not based on contractual payment dates, but rather when claims occur and how long the claims handling lasts. See the expected payout pattern presented in previous figure. Liquidity risk in Gjensidige Bank is described separately. For a going concern, this will result in a positive net cash flow under normal circumstances. Large net outflows will normally arise only from acquisitions or recapitalization of subsidiaries. In case of a large claim or catastrophic event, the payments will take place some time after the event, and the reinsurers will cover most of the amount within a short time after the payments have been made to the claimants. In an extreme scenario, reinsurers could fail to honor their obligations after such a catastrophic event. Based on this kind of scenario, the Board of Directors has set a liquidity requirement for 2010 of at least nok 4,000 million in the most liquid funds, defined as deposits in banks, bonds and certificates issued by oecd countries or guaranteed by these countries and money market instruments with a rating of A or better and with a due date within six months. The current allocation meets these requirements. The table below shows the classification used and the amounts as at 31 December 2010 for Gjensidige Forsikring asa. Table 23 Liquidity investment assets, Gjensidige Forsikring asa NOK million Incl. bonds held to maturity Excl. bonds held to maturity Bank deposits 560.5 560.5 Minimum level Bonds and certificates issued by, or guaranteed by oecd-countries 2,627.2 1,358.9 Fixed income portfolio with rating A or better and maturity less than 6 months 1,217.1 705.9 Total 4,404.8 2,625.4 4,000.0 MANageMENT of financial risk gjensidige pensjonsforsikring Gjensidige Pensjonsforsikring (gpf) has a separate capital management strategy approved by the Board of Directors, which specifies targets and limits for and the organization of the capital management activities. A separate investment committee with representatives from gpf, Gjensidige Investeringsrådgivning (gir) and the Group s investment and capital management departments gives advice to the Ceo on matters pertaining to management and risk management. Investment, including entering into contracts for new external mandates, is centralized in the Group s investment department. Gjensidige Pensjonsforsikring (gpf) has separate strategies for the funds in each portfolio the unit-linked, paid-up policy, other group policy and company portfolios. gpf does not bear investment risk for the unit-linked portfolio; both positive and negative returns are passed on in full to the customers. The other portfolios expose the Company s equity to risk. For the company and other group policy portfolios, very little risk is born, the funds are mainly invested in bank deposits and fixedincome instruments with high creditworthiness. The company portfolio is financed by the Company s equity and also includes a small trading portfolio to support incoming and/or outgoing capital in the customer portfolios. The other group portfolio is funded by premium reserves, claims provisions for unreported and/or unsettled claims and the risk equalization fund. The paid-up policies give a minimum guaranteed interest to the customers at the same time as the customers receive a percentage of any excess return above this amount. Therefore, for the paid-up policy portfolio, the objectives are to be able to offer the customers a competitive return over a period of time at the same time as the risk relative to the strain on equity is kept at a targeted low level and to follow a balanced strategy where the risk-taking is managed by the current status of the buffer capital at any given time. The pension and

gjensidige annual report 2010 109 savings operations have most of their balance in defined-contribution products, but the paid-up policy portfolio is growing. Therefore, gpf is also exposed to the types of risk mentioned above and has its own investment strategy approved by the Board of Directors, which sets the limits for exposure. The portfolios are stress tested in the same way as for the insurance operations (cf. the section above) to measure whether the buffer capital can tolerate a given decline in value. The paid-up policy portfolio amounted to nok 1,902.4 million as at 31 December 2010 with an average guaranteed interest rate of 3.6 per cent. The other group policy portfolio amounted to nok 254.0 million, whereas the company portfolio had nok 299.8 million in financial assets. Table 24 Asset allocation Gjensidige Pensjonsforsikring, excluding the unit-linked portfolio NOK million 31.12.2010 31.12.2009 Money market 14.9 349.9 Bank deposits 340.4 442.8 Bonds held to maturity 587.3 637.7 Loans and receivables 1,249.6 Current bonds 214.8 201.6 Equities 39.5 148.5 Hedgefunds 0.3 Other 9.8 Total 2,456.3 1,780.8 The accounting interest-rate risk in gpf s assets is extremely limited because bonds (classified as bonds held to maturity and loans and receivables) and the remaining fixed-income instruments are of short duration. gpf is exposed to equity price risk through its investment in equities. The following table shows the effect of a ten per cent drop in the stock market and a one percentage point increase in the interest rate level of equity in gpf. The calculations do not take tax effects into consideration or that a share of the return normally is allocated to the customers. Table 25 Sensitivity fixed-income and equity portfolio, Gjensidige Pensjonsforsikring NOK million 31.12.2010 31.12.2009 100 bps parallell shift up (11.5) (9.0) 10 % drop in equity prices (3.9) (14.2) MANageMENT of credit AND financial risk gjensidige BANK The banking business is exposed to credit risk in its loan portfolio and the liquidity and interest-rate risk from any mismatches of maturity and time of repricing between assets and liabilities. The bank is also exposed to credit risk in connection with placement in securities. The bank does not invest in equity instruments, nor does it have any foreign currency positions. The Board of Directors of Gjensidige Bank approves the Company s credit policy and lending regulations. A credit strategy is also specified annually, as well as limits for market and liquidity risk. Risk areas are continuously monitored and statistical models used to calculate capital needs given specified confidence level for most risk categories. The capital need is calculated over the strategy horizon in the current strategy plan, included in the ICaap document, and reported to Board of Directors quarterly. In 2009, Gjensidige Bank acquired the consumer loans portfolio of Citibank s Norwegian business. After that, the credit business was divided into two main parts home loans and consumer loans. In order to measure interest rate risk, it is taken into consideration that both asset and liabilities are interest rate sensitive. As at 31 December 2010 there is a negative interest rate exposure in the interval of three months to one year of 313 milli years, whereas net accumulated interest rate exposure over three months is negative with 299 milli years. A limit for maximum loss from a one percentage point parallel shift in the yield curve of nok five million is approved by, and reported monthly to the Board of Directors. In the banking operations, the assets and liabilities have contractual maturities. On the liability side, the customers in general may withdraw their deposits at short notice, resulting in a short time to maturity. The Board of Directors has specified liquidity reserve requirements in the form of short-term deposits, liquid securities and/or committed drawing rights that will afford the necessary restructuring time in a period with less access to liquidity, in accordance with guidelines specified by Finanstilsynet (the Financial Supervisory Authority of Norway). Based on these criteria, the liquidity reserve requirement as at 31 December 2010 was nok 1,200.8 million, with an actual reserve of nok 1,816.1 million. perspektiv results A large part of the fixed-income portfolio in gpf does not have an official rating. These fixed-income securities are mainly invested in Norwegian banks and financial institutions. Table 26 Fixed-income portfolio per rating, Gjensidige Pensjonsforsikring NOK million 2010 2009 Rating aaa 488.0 99.3 aa 158.0 73.0 A 866.0 590.8 BBB 20.0 121.0 BB 37.0 15.6 B 58.0 0.3 CCC or lower 10.0 0.1 Not rated 780.0 732.0 Total 2,417.0 1,632.0 The largest individual exposures per counterparty are included in the Group s table above. Credit risk Credit risk is the risk of losses incurred as a result of customers/opposite parties not being able to or willing to fulfill its obligations to the bank. The bank s credit risk comes from loans and credits given. The Board of Directors sets the limits for the bank s credit risk through the credit policy and the yearly credit strategy which lays out the guidelines for the credit business. Gjensidige Bank s existing portfolio mainly consists of home loans within 80 per cent of an acceptable value. Loans that exceed 80 per cent of the acceptable value are only given to designated customer groups. An analysis of the loan portfolio carried out by Lindorff Decision shows a very high customer quality. All new home loan applications are subject to evaluation of customer financial strength, and in addition to service a loan with today s conditions, the customer must also be able to service its total loan portfolio in case the rate increases by up to 4.5 percentage points.

110 gjensidige annual report 2010 Gjensidige Bank is one of the largest providers of consumer finance in Norway. This portfolio has higher credit risk than the home loan portfolio, but the risk is priced according to internal models. The portfolio development is closely monitored through analyses, and evaluated based on risk adjusted returns. The portfolio show sound profitability. The risk in the loan portfolio is measured on a monthly basis by the internal model. The customers are categorized in three main categories depending on their risk profile. Classification criteria are not similar in the two main parts, but are shown in aggregate for Gjensidige Bank in the table below. Table 27a - Risk classification banking operations 2010 NOK million Gross lending Per cent Individual impairment losses Group impairment losses Low risk 10,233.1 72.5 % 5.8 Medium risk 3,310.9 23.4 % 4.2 High risk 575.5 4.1 % 0.7 106.5 Total 14,119.5 100.0 % 0.7 116.5 Table 27b - Risk classification banking operations 2009 NOK million Gross lending Per cent Individual impairment losses Group impairment losses Low risk 8,784.8 75.9 % 7.2 Medium risk 1,912.2 16.5 % 5.2 High risk 878.6 7.6 % 0.8 2.1 Total 11,575.6 100.0 % 0.8 14.5 The following table shows the amount of unpaid overdue payments and overdrafts. Gjensidige Bank bought the Norwegian part of Citibank s consumer loans operations in December 2009. As the portfolio migration was late in the year, payment overdue did not materialize in 2009 figures. The acquisition of the portfolio has increased the overall profitability in Gjensidige Bank in 2010, as well as increased overdue payments and losses on loans. Overdue loans are subject to impairment on an individual basis every quarter if exposure is above nok 200 thousands. In smaller exposures, groups of similar risky assets are evaluated, and net present value of future payments is calculated. The difference between net present values of future cash flows and loan exposure balance is posted as impairment on existing loans. Table 28 - Payments overdue NOK million 31.12.2010 31.12.2009 0-30 days 233.9 0.7 30-90 days 86.3 4.9 Over 90 days 157.5 28.4 Total 477.8 34.0 Interest rate risk The Board of Directors has approved limits for interest rate risk. Interest rate risk under one year is limited to an exposure of maximum 500 milli years. There is an additional limit for interest rate risk over all durations of +/- 300 milli years. The bank s maximum total exposure to interest rate risk is 500 milli years. Interest rate risk below three month duration is reported, but is not included in overall risk limit. At full interest rate exposure a parallel shift in the yield curve of one percentage point implies a maximum loss tolerance of nok five million. Utilization of the limits is reported monthly to the Board of Directors. Fixed-rate periods in assets and liabilities, through fixed-rate products on the bank s loans, constitute interest rate risk, and are included in the limits stated above. As at 31 December 2010 the bank has a negative interest rate risk exposure in the interval three months to one year of 313 milli years. Net accumulated interest rate risk exposure above three months duration is negative with 299 milli years. The bank measures the market risk by using Value at Risk analysis in the bank s total risk model, where one uses a confidence interval of 99.95 per cent. A confidence interval of 99.95 per cent implies that there is only a 0.05 per cent probability that the bank has not set aside enough capital to cover an unexpected loss. As at 31 December the capital provision for interest rate risk was nok 5.2 million and nok 4.3 million in 2009. Liquidity risk Liquidity risk is the risk of the bank not being able to meet payments at due date, and/or finance an increase in assets, without substantial extra costs arising, in form of fall in prices on assets being subject to realizing, or in form of expensive financing. We distinguish between two types of liquidity risk the bank s credit rating is downgraded due to severe losses, but liquidity is still available in the financial market the bank has no access to liquidity due to severe losses The provision for the first type of liquidity risk is estimated by the internal total risk model. Losses incurred from a rating downgrade are defined as a charge to equity arising from increased funding costs. Liquidity risk stemming from failed access to liquidity is met with a liquidity buffer held to cover liabilities as they fall due. Through downward economic trend-scenarios and stress testing linked to the probability and consequences of falling financing, requirements for deposits-to-loan ratio, maturity structure and liquidity reserve are determined. A relative short-term time-frame is the base of these estimates. The Board of Directors has approved limits to the liquidity structure over different time periods, and a target for long-term liquidity. The bank shall have available liquidity reserves (buffer capital) in short term deposits, liquid financial assets and/or committed drawing facilities that are adequate to ensure a reasonable amount of time to take actions if liquidity in the financial markets evaporates. The liquidity reserve shall cover the sum of a) 100 per cent of funding due in one month b) 100 per cent of funding due in two months c) 75 per cent of funding due in three months d) 50 per cent of funding due in four months e) 50 per cent of funding due in five months f) 25 per cent of funding due in six months g) unexpected decrease in deposits of nine per cent measured by last public quarterly financial statement Based on the above requirements the liquidity reserve requirement as at 31 December 2010 is nok 1,201 million. At year-end Gjensidige Bank had a liquidity reserve of nok 1,816.1 million, where nok 857.0 mil-

gjensidige annual report 2010 111 lion is placed in short term deposits and nok 951.1million is placed in bonds, certificates and monetary funds. nok 162.4 million is placed in bonds where Gjensidige Bank Boligkreditt as is prioritized (eliminated in the consolidated financial statement) and not included in the trade with Norges Bank (Norwegian Central Bank). The liquidity reserve is mainly realizable within days and the reserve is sufficient to cover maturity of debt for 19 months. The table below shows the maturity structure. Table 29a Liquidity profile banking operations 2010 NOK million < 1 month 1-3 months 3-12 months 1-5 years More than 5 years Without maturity Total Debt to credit institutions 3.8 13.6 542.5 559.9 Deposits from and liabilities to customers 9,079.7 0.2 41.4 0.2 9,121.4 Debt incurred through the issue of securities 119.2 229.7 955.0 3,776.3 5,080.2 Loan approvals and unused drawing rights 2,367.0 2,367.0 Derivatives - gross outflows * 0.4 12.7 37.5 50.6 Total liabilities 11,566.3 233.7 1,022.7 4,356.5 17,179.2 * Derivatives - gross inflows 0.5 16.5 49.0 65.9 Financial derivatives - net settlement (negative figures gives net payment) (0.1) (3.8) (11.4) (15.3) Table 29b Liquidity profile banking operations 2009 NOK million < 1 month 1-3 months 3-12 months 1-5 years More than 5 years Without maturity Total perspektiv results Debt to credit institutions 2.8 14.8 556.2 573.8 Deposits from and liabilities to customers 6,550.4 6,550.4 Debt incurred through the issue of securities 117.2 403.8 1,963.2 2,130.5 4,614.7 Loan approvals and unused drawing rights 2,578.0 2,578.0 Derivatives - gross outflow * 2.3 3.9 33.0 47.2 86.5 Total liabilities 9,248.0 410.5 2,011.1 2,733.9 14,403.4 * Derivatives - gross inflows 0.4 47.3 64.6 112.3 Financial derivatives - net settlement (negative figures gives net payment) 1.9 3.9 (14.3) (17.4) (25.9) Concentration risk Concentration risk is the possible losses incurred due to large single exposures or limited geographical or business diversification. Concentration risks are managed through risk limits, and are measured and evaluated in annual stress tests and scenario analyses within the credit risk area. As at 31 December 2010 the portfolio is well diversified geographically, with the largest exposure in areas of Norway with the highest population density. The largest single exposure is approximately nok 9.6 million. The sum of the ten largest exposures is nok 80.9 million. In the liquidity reserve, the largest issuer of financial assets is the Norwegian Government with nok 514.9 million.

112 gjensidige annual report 2010 4 segment INforMatioN The group has seven reportable segments, as described below, which offers different products and services within different geographical areas. The Group Ceo holds regular meetings with its reporting managers concerning performance management, which focuses on future measures to ensure performance and deliveries. General insurance is the Group s core activity. General insurance is divided into four segments, mainly based on the customer s geographical placement. Other operational segments deliver products and services mainly to customers in Norway. DESCRIPTION of the segments General insurance Private Norway Gjensidige is a broad supplier of general insurance products to private consumers in Norway. The company is a market leader in motor insurance and accident and health insurance and agriculture insurance, and it also has a solid position in other types of private insurances. General insurance Commercial Norway Gjensidige is a complete provider of general and life insurance products for Norwegian businesses. The company has a particularly strong position in the market segment for medium-sized enterprises, and it is the clear market leader in accident and health insurances. General insurance Nordic The Group offers general insurance products to private and commercial customers in Sweden and Denmark. Both operations are run under the brand Gjensidige. Gjensidige has entered inte a strategic collaboration with Nykredit concerning distribution of general insurance for Gjensidige to the private market under the brand Nykredit. Furthermore, the Danish operations are the Group s centre of expertise for insurances to municipalities and other public sector entities in Norway, Sweden and Denmark, under the KommuneForsikring brand. The Norwegian branch of the Swedish operations handles the Group s white label initiative. General insurance Baltic The Baltic insurance market is in an early development phase and a significant share of the market is still uninsured. Motor insurances are the most widespread insurance product in these markets. Gjensidige Baltic has operations in each of the three Baltic states. Pension and savings Gjensidige offers a broad range of pension, investment and savings products for both the private and commercial market. The products offered includes among others occupational pensions, fund pensions, paid-up policies and fund savings. Online retail banking Gjensidige Bank is a nationwide Internet bank aimed at the private, affinity group and agricultural markets in Norway. The bank offers traditional banking products adapted to electronic distribution. Health care services Under the brand Hjelp24, a variety of health care services are offered. The service offering includes corporate health care services, personal security alarm services, private hospital and specialist services, and work environment surveys. The services are offered to private, commercial and public customers. DESCRIPTION of the segments INcoME AND EXpeNses, assets AND liabilities Segment income is defined as earned premiums, net of reinsurance, for general insurance, earned premiums, net of reinsurance, management income and other income for Pension and savings, interest and credit commission income and other income for Online retail banking, and operating income for Health care services. Segment expenses are defined as claims incurred for general insurance and for pension and savings, interest expenses etc. for Online retail banking, operating expenses for all segments, and net income for investments for Pension and savings as well as Online retail banking. Segment assets for the general insurance segments in Norway consist of assets that can be directly attributable to the general insurance products, mainly receivables and reinsurers share of insurance-related liabilities. For the other segments segment assets consist of total assets. Segment liabilities for the general insurance segments in Norway consist of liabilities that can be directly attributable to the general insurance products, mainly insurance-related and reinsurers share of insurance-related liabilities. For the other segments segment liabilities consist of total liabilities.

gjensidige annual report 2010 113 4 segment information (cont.) NOK million Private Norway GENeral INsuraNce Commercial Norway Nordic Baltic pension and savings online retail banking Health care services eliminations etc. 1 Total 2010 Segment income Segment income - external 8,279.4 4,418.5 3,906.1 459.3 372.4 790.9 544.7 19.5 18,790.8 Segment income - group 2 Total segment income 8,279.4 4,418.5 3,906.1 459.3 372.4 790.9 544.7 19.5 18,790.8 - Claims, interest expenses, loss etc. (6,296.7) (3,602.6) (3,252.0) (305.3) (258.1) (484.9) (14,199.6) - Operating expenses (1,194.5) (570.0) (731.5) (136.7) (156.7) (302.1) (517.3) (476.5) (4,085.3) + Net income from investments 14.5 29.2 2,704.5 2,748.2 Segment result/profit/(loss) before tax expense 788.2 245.8 (77.4) 17.4 (27.9) 33.1 27.3 2,247.5 3,254.0 Impairment loss goodwill (100.0) (100.0) Segment assets 2,052.3 1,310.6 15,762.1 739.7 7,257.2 15,763.7 338.8 (368.3) 42,856.1 Other assets 3 41,250.8 Total assets 84,106.8 Segment liabilities 13,598.7 14,303.5 8,242.6 405.1 6,794.6 14,473.7 207.9 (346.2) 57,680.0 Other liabilities 3 3,289.1 Total liabilities 60,969.1 perspektiv results NOK million Private Norway GENeral INsuraNce Commercial Norway Nordic Baltic pension and savings online retail banking Health care services eliminations etc. 1 Total 2009 Segment income Segment income - external 7,856.2 4,737.3 2,403.5 663.4 144.5 323.3 509.1 33.4 16,670.7 Segment income - group 2 Total segment income 7,856.2 4,737.3 2,403.5 663.4 144.5 323.3 509.1 33.4 16,670.7 - Claims, interest expenses, loss etc. (6,007.4) (3,819.0) (1,833.0) (411.5) (121.5) (268.8) (12,461.4) - Operating expenses (1,296.3) (613.3) (417.5) (211.4) (179.0) (147.2) (476.5) (489.6) (3,830.8) + Net income from investments 48.2 16.5 2,723.2 2,788.0 Segment result/profit/(loss) before tax expense 552.4 305.0 152.9 40.5 (107.8) (76.3) 32.7 2,267.0 3,166.5 Impairment loss goodwill (22.5) (107.7) (130.2) Segment assets 1,772.5 1,289.8 10,088.8 898.1 4,921.8 12,732.9 268.1 (11.8) 31,960.3 Other assets 3 42,908.6 Total assets 74,868.9 Segment liabilities 13,011.7 12,703.6 6,732.6 550.3 4,468.0 11,520.6 151.2 (11.8) 49,126.2 Other liabilities 3 3,774.5 Total liabilities 52,900.7 1 Eliminations etc. consist of internal eliminations and other income and expenses not directly attributable to one single segment. 2 There is no significant income between the segments at this level in 2009 and 2010. 3 Other assets and liabilities are either not directly attributable to one single segment or can not be allocated on a reasonable basis to a single segment. An impairment loss on goodwill is in 2009 and 2010 recognised in two segments; Nordic and Baltic. For further information, see note 5.

114 gjensidige annual report 2010 5 intangible assets NOK million Goodwill 1 relationship Customer Trademarks Internally developed software Other intangible assets Total Cost As at 1 January 2009 1,797.1 531.3 169.3 612.2 983.2 4,093.0 Reclassifications 30.9 10.0 3.0 (43.9) 0.0 Additions 2.5 43.1 45.6 Additions through business combinations 13.2 13.2 Additions from internal development 20.7 3.0 23.7 Disposals (0.8) (31.8) (32.6) Exchange differences (150.6) (67.2) (23.5) (29.5) (3.4) (274.1) As at 31 December 2009 1,662.2 495.0 155.8 648.7 907.0 3,868.7 Uncompleted projects 84.4 84.4 As at 31 December 2009, including uncompleted projects 1,662.2 495.0 155.8 733.0 907.0 3,953.1 Amortisation and impairment losses As at 1 January 2009 (33.7) (106.5) (71.9) (206.1) (927.5) (1,345.8) Reclassifications (16.0) 4.4 (2.9) 14.6 0.0 Amortisation recognised during the period (22.5) (53.6) (12.6) (118.9) (21.0) (228.6) Disposals 0.3 31.8 32.1 Impairment losses recognised in profit or loss during the period (107.7) (107.7) Exchange differences 9.4 19.2 9.9 10.5 2.5 51.5 As at 31 December 2009 (154.7) (156.9) (70.3) (317.1) (899.6) (1,598.5) Carrying amount As at 1 January 2009 1,763.4 424.8 97.3 449.8 55.7 2,790.9 As at 31 December 2009 1,507.5 338.1 85.5 416.0 7.5 2,354.6 Cost As at 1 January 2010 1,662.2 495.0 155.8 648.7 907.0 3,868.7 Additions 2.6 105.8 8.5 116.9 Additions through business combinations 1,261.0 380.6 2.0 254.1 1,897.8 Additions from internal development 39.6 39.6 Disposals (11.8) 0.3 (901.8) (913.4) Exchange differences (46.4) (20.0) (9.8) (6.7) (1.5) (84.3) As at 31 December 2010 2,867.6 855.7 146.0 789.7 266.3 4,925.3 Uncompleted projects 76.4 76.4 As at 31 December 2010, including uncompleted projects 2,867.6 855.7 146.0 866.0 266.3 5,001.6 Amortisation and impairment losses As at 1 January 2010 (154.7) (156.9) (70.3) (317.1) (899.6) (1,598.5) Amortisation recognised during the period (73.2) (11.4) (136.1) (33.9) (254.6) Disposals (26.0) 897.1 871.1 Impairment losses recognised in profit or loss during the period (111.0) (0.6) (111.6) Exchange differences 4.8 9.1 3.7 3.8 0.9 22.3 As at 31 December 2010 (286.9) (221.1) (78.0) (450.1) (35.4) (1,071.4) Carrying amount As at 1 January 2010 1,507.5 338.1 85.5 416.0 7.5 2,354.6 As at 31 December 2010 2,580.7 634.6 68.1 416.0 230.9 3,930.2 Amortisation method N/A Straight-line Straight-line Straight-line Straight-line Useful life (years) N/A 10 10 5-8 5-10 1 Goodwill is amortised because previously disparaged deferred tax asset in Sweden now has been utilised. In accordance with IFrs 3 goodwill is therefore amortised by the same amount. The Group s intangible assets are either acquired or internally developed. Goodwill, customer relationships, trademarks and parts of other intangible assets are all acquired through business combinations, and are a result of a purchase price allocation of initial cost of the acquisition. Internally developed software is developed for use in the insurance business. External and internal assistance is used in relation with implementation or substantial upgrade, including adjustment of standard systems, are capitalized as intangible assets. Amortization is included in the accounting line Operating expenses for the different segments. Access through business combinations during 2010 generally concerns the acquisition of Nykredit Forsikring where the recognised values include customer relations, distribution contracts, databases including damage history and associated companies. The termination of other intangible assets concerns impaired insurance portfolios. None of the intangible assets have undetermined useful lives. In 2010 impairment losses on intangible assets in Tennant Forsikring have been recognised, and a technical impairment of goodwill in Oslo Areal has been conducted.

gjensidige annual report 2010 115 5 Intangible assets (cont.) Impairment testing of goodwill The carrying amount of goodwill in the Group as at 31 December 2010 is nok 2.580,7. This is primarily related to acquisitions of different subsidiaries/portfolios in the period 2006 to 2010. See table. NOK million 2010 2009 Subsidiaries/portfolios Glitne Invest 183.2 165.4 Oslo Areal 220.6 266.9 Gjensidige Forsikring, Danish branch Fair Forsikring group 1 (portfolio) 534.3 673.5 nykredit Forsikring 2 (portfolio) 487.9 Gjensidiges Arbejdsskadeforsikring 98.4 Nykredit Forsikring 753.6 Gjensidige Baltic 65.5 69.8 Gjensidige Sweden 151.2 251.2 Gjensidige Forsikring, Swedish branch 84.7 79.2 Gjensidige Bank 1.5 1.5 Total 2,580.7 1,507.5 1 Fair Forsikring has sold the portfolio and inventory to the Danish branch of Gjensidige Forsikring. 2 Nykredit Forsikring has sold the acquisition portfolio to the Danish branch of Gjensidige Forsikring. Each of the units is considered to be separate cash-generating units. In Oslo Areal is each underlying property defined as a cash-generating unit, and goodwill related to Oslo Areal occurs as a consequence of provision for deferred tax on temporary differences (tax amortization benefit). In Glitne Invest every segment in the subsidiary Hjelp24 is a cash-generating unit. Goodwill in Gjensidige Bank is established through the purchase of Citibank s Norwegian portfolio of consumer loans. The annual assessment of impairment losses was carried out in the third quarter of 2010. An indication assessment was also carried out in the fourth quarter in order to assess whether new circumstances calls for new impairment testing of goodwill. An impairment loss of goodwill amounting to nok 100.0 million is recognised in Tennant Forsikring due to changed business model compared to the original model. The discounting rate used in connection with the impairment of Tennant Forsikring during the first quarter of 2010 was 8.4 per cent. An impairment loss of goodwill has also been recognised in Oslo Areal amounting to nok 37.0 million. The impairment is of a technical nature due to this being goodwill connected to deferred tax reversed. From the amount of nok 37.0 million, nok 11.0 million is recognised as impairment losses, while nok 26.0 million is recognised as disposal through tax cost. There is no need for recognition of impairment losses of goodwill or other intangible assets related to other business combinations/portfolios. Recoverable amount for the cash flow generating unit is determined based on an assessment of the utility value. The utility value is based on a discounting of future cash flows, with a relevant discount rate that takes into account maturity and risk. Budgets/prognoses and the period for which the cash flows are projected The projection of cash flows from the Swedish, Danish and Baltic subsidiaries is based on budgets for the next three years reviewed by the management and approved by the boards. In the period after 2014 an annual growth of three per cent has been projected until 2019 for Gjensidige Sweden and Fair Forsikring, and from 20 to ten per cent in Gjensidige Baltic. The terminal value is calculated in 2019. The growth in Gjensidige Sweden and Fair Forsikring is grounded in the fact that the companies are small and with a solid parent company, which gives them good chances of increasing market shares. In Gjensidige Baltic it is expected a market growth which will have an impact on the future cash flows. Cash flows are estimated to a normal level before a terminal value is calculated. Gjensidige normally has a ten-year horizon on its models, as the company is in a growth phase and a shorter period will not give a correct view of expected cash flows. The management s method As far as possible, the management has sought to document the assumptions upon which the models are based through external information. External information is first and foremost used in the assessment of discount rate and exchange rates. When it comes to future cash flows, the management has also considered the degree of historical achievement of budgets. If expected budgeted results are not achieved, the management has conducted a deviation analysis. These deviation analyses are reviewed by the Board of Directors of the respective subsidiaries, and also the management in Gjensidige Forsikring. Level of combined ratio (cr) The expected CR level is considered to be somewhat higher in the growth period than at the point in time when the terminal value is calculated. See table. CR-level in growth period CR-level when calculating terminal value Cashflow generating units Gjensidiges Arbejdsskadeforsikring 93.5 % 93.5 % Gjensidige Forsikring, Danish branch 98.2-96.5 % 96.5 % Gjensidige Forsikring, Swedish branch 96.8-95.2 % 94.2 % Gjensidige Sweden 96.1-95.3 % 95.0 % Gjensidige Baltic 95.8-94.4 % 94.4 % Growth rate The growth rate is considered to be 3.0 per cent. This is based on the following assumptions: Long-term real Bnp-growth 2-3 % Long-term expected inflation 2-3 % Total nominal expected growth 4-6 % Based on an overall assessment the management has nevertheless chosen to use 3.0 per cent as this is considered to be more in keeping with expectations in the market. Discount rate The discount rate is before tax, and is composed of a risk-free interest rate, a risk premium, and a market beta. The risk-free rate is equivalent to average five-year and ten-year interest rate on government bonds in the respective countries where the subsidiaries operate. In the Baltic perspektiv results

116 gjensidige annual report 2010 5 Intangible assets (cont.) we have used an average of the two-year and eight-year risk-free rate. The risk-free rate for assessment of impairment in 2010 is 2.1 per cent for Denmark, 2.25 percent for Sweden and 8.84 per cent for the Baltic. In addition a risk premium of 5.5 percentage point in Denmark and Sweden and 6.0 percentage points in the Baltic has been added. Sensitivity analysis key assumptions The excess values associated with the acquisition are based on different key assumptions. If these assumptions change significantly from what they are expected to be in the impairment models, a need for impairment may arise. The models are especially sensitive to deviations from expected CR. Sensitivity table Discount rate increases by 1% Growth reduced by 2% compared to expected next 3 years CR increases by 2% next 3 years All circumstances occur simultanously Gjensidige Forsikring, Danish branch Gjensidiges Arbejdsskadeforsikring No need for impairment No need for impairment No need for impairment No need for impairment No need for impairment No need for impairment No need for impairment No need for impairment Gjensidige Baltic No need for impairment No need for impairment No need for impairment No need for impairment Gjensidige Sweden Need for impairment, app. nok 40 million No need for impairment No need for impairment Need for impairment, app. nok 70 million Gjensidige Forsikring, Swedish branch Need for impairment, app. nok 80 million No need for impairment No need for impairment Need for impairment, app. nok 120 million Nykredit Forsikring Need for impairment, app. nok 310 million Need for impairment, app. nok 60 million Need for impairment, app. nok 60 million Need for impairment, app. nok 410 million

gjensidige annual report 2010 117 6 shares IN associates Carrying Carrying Registered Interest Cost amount Cost amount NOK million office held 31.12.2010 31.12.2010 31.12.2009 31.12.2009 Storebrand asa Oslo 24.3 % 4,604.4 3,287.8 4,604.4 2,903.5 SpareBank1 sr-bank Stavanger 10.3 % 866.4 958.9 866.4 877.4 Bilskadeinstituttet as Oslo 29.5 % 0.3 1.4 0.3 1.4 Forsikring og Finans Sandnes as (sold during 2010) N/A N/A 0.1 Forsikringskontoret Johansen og Torkelsen as (sold during 2010) N/A N/A 0.1 0.2 Fossmark Assuranse as (sold during 2010) N/A N/A Vervet as included subordinated loan 1 Tromsø 25.0 % 30.3 0.8 30.3 0.3 Botrygt Prinsegården as Fetsund 50.0 % 0.3 0.4 0.3 0.4 FDC A/S Ballerup, Danmark 33.3 % 13.1 26.4 Total shares in associates 5,514.8 4,275.5 5,501.8 3,783.3 1 Subordinated loan of nok 24,0 million is included in cost. ADDITIONAL INFORMATION Profit/(loss) Share of NOK million Assets Equity Liabilities Revenues Profit/(loss) recognised 2 stock value For the whole company 2010 Storebrand asa 390,414.0 18,417.0 371,997.0 48,241.0 1,480.0 342.2 4,777.9 SpareBank1 sr-bank 134,778.0 9,402.0 125,376.0 3,414.0 1,317.0 142.1 1,180.6 Bilskadeinstituttet as 5.3 4.8 0.5 1.6 0.2 N/A Forsikring og Finans Sandnes as (sold during 2010) N/A N/A N/A N/A N/A (0.2) N/A Forsikringskontoret Johansen og Torkelsen as (sold during 2010) N/A N/A N/A N/A N/A (0.3) N/A Fossmark Assuranse as (sold during 2010) N/A N/A N/A N/A N/A (0.1) N/A Vervet as 109.2 13.1 96.1 0.5 (0.4) N/A Botrygt Prinsegården as 0.8 0.8 N/A FDC A/S 111.2 53.8 57.4 334.0 12.8 5.0 N/A Total shares in associates 525,418.5 27,891.5 497,527.0 51,991.2 2,809.5 488.7 perspektiv results ADDITIONAL INFORMATION Profit/(loss) Share of NOK million Assets Equity Liabilities Revenues Profit/(loss) recognised 2 stock value For the whole company 2009 Storebrand asa 366,159.0 17,217.0 348,942.0 48,236.0 934.0 252.1 4,330.2 Sparebank1 sr-bank 124,909.0 8,073.0 116,836.0 2,674.0 1,111.0 11.0 1,035.7 Bilskadeinstituttet as 5.3 4.8 0.5 1.6 0.2 N/A Forsikring og Finans Sandnes as 0.7 0.4 0.3 2.1 0.1 N/A Forsikringskontoret Johansen og Torkelsen as 4.0 0.6 3.4 6.7 N/A Fossmark Assuranse as 0.7 0.1 0.6 2.0 (0.6) N/A Vervet as 107.6 11.7 95.9 0.8 0.1 N/A Botrygt Prinsegården as 0.8 0.8 0.2 N/A Total shares in associates 491,187.1 25,308.4 465,878.7 50,923.2 2,044.8 263.3 2 Share of profit/(loss) is adjusted for Gjensidige s net excess values and accounting policies. The investment in SpareBank1 sr-bank is classified as investments in an associate and is carried at cost. Gjensidige Forsikring asa owns 16.3 per cent of the primary certificate capital and 10.3 per cent of the equity in the bank, and has not, based solely on the interest held alone, significant influence. However, the company is represented in both the Board of Directors of Sparebank1 sr-bank and the nomination committee. This gives Gjensidige Forsikring asa significant influence and thus the opportunity to participate in the financial and operational decissions of the bank. Gjensidige also owns bonds issued by SpareBank1 sr-bank. The carrying amount of these bonds is nok 5.0 million. Percentage of votes held is the same as percentage of interest held for all investments.

118 gjensidige annual report 2010 7 owner-occupied property, plant AND EQuipMENT NOK million Owner-occupied property Plant and equipment 1 Total Cost As at 1 January 2009 385.1 667.6 1,052.8 Additions 1.8 124.7 126.5 Disposals (0.9) (5.7) (6.6) Exchange differences (20.3) (9.0) (29.3) As at 31 December 2009 365.8 777.6 1,143.4 Uncompleted projects 19.3 19.3 As at 31 December 2009, including uncompleted projects 365.8 797.0 1,162.7 Depreciation and impairment losses As at 1 January 2009 (54.4) (409.3) (463.7) Depreciation for the year (9.4) (79.9) (89.3) Disposals 0.3 2.3 2.6 Impairment losses (21.4) 0.2 (21.2) Exchange differences 1.4 5.9 7.3 As at 31 December 2009 (83.5) (480.8) (564.4) Carrying amount As at 1 January 2009 330.7 324.7 655.4 As at 31 Desember 2009 282.2 316.1 598.4 Cost As at 1 January 2010 365.8 777.6 1,143.4 Transferred to/from investment property (87.9) Additions 206.1 122.7 328.8 Disposals (119.4) (55.5) (174.9) Exchange differences (3.9) (3.2) (7.1) As at 31 December 2010 360.6 841.7 1,202.2 Uncompleted projects 53.5 53.5 As at 31 December 2010, including uncompleted projects 360.6 895.2 1,255.8 Depreciation and impairment losses As at 1 January 2010 (83.5) (480.8) (564.4) Depreciation for the year (6.8) (95.2) (102.0) Disposals 56.4 24.2 80.6 Impairment losses 2 (2.2) (2.2) Exchange differences (6.0) 1.7 (4.2) As at 31 December 2010 (42.1) (550.1) (592.2) Carrying amount As at 1 January 2010 282.2 316.1 598.4 As at 31 December 2010 318.5 345.1 663.6 Depreciation method Straight-line Straight-line Useful life (years) 10-50 3-5 1 Plant and equipment consist mainly of machinery, vehicles, fixtures and furniture. 2 At the end of the first quarter an impairment loss of nok 2.2 million on an owner-occupied property was recognised. The new value of the property was determined by using the Group s internal valuation model, cf. note 8 investment properties. The valuation was not based on observeable market prices or recent transactions. The carrying amount of the property before the impairment was nok 16.8 million. Each component of owner-occupied property, plant and equipment are depreciated using the straight-line method over estimated useful life. Land is not depreciated. Estimated useful life for the period and comparable periods are between ten and 50 years for owner-occupied property, with technical installations having the highest depreciation rate, and between three and five years for plant and equipment. There are no restrictions on owner-occupied property, plant and equipment. Owner-occupied property, plant and equipment are not pledged as security for liabilities. The market value of owner-occupied property exceeds the carrying amount as shown below. For plant and equipment there is no material difference between the carrying amount and the market value. Some equipment, such as furniture, is fully depreciated, but still in use. NOK million 2010 2009 Market value of land and owner-occupied property 332.7 348.7 Carrying amount of land and owner-occupied property 318.5 282.2 Excess value beyond carrying amount 14.2 66.5

gjensidige annual report 2010 119 8 INvestMENT properties NOK million 2010 2009 Statement of financial position As at 1 January 5,509.9 5,618.9 Additions 4.1 2.6 Additions from subsequent expenditure 146.1 85.2 Additions through business combinations 412.0 Disposals (256.1) (5.9) Net gains/(losses) from fair value adjustments (1.0) (190.9) Transfer to/(from) owner-occupied property 87.9 Exchange rate differences (2.7) As at 31 December 5,900.3 5,509.9 Financial income and expenses from investment properties is shown in note 20. The Gjensidige Insurance Group carries investment properties at fair value. Investment properties consist of commercial properties that are rented to tenants outside the Group, or are acquired in accordance with the company s capital management strategy. Properties used by Group companies are classified as owner-occupied property, see note 7. In properties that are both rented to tenants outside the Group and that are used by the Group s own business, the parts held for rent that can be sectioned are classified as investment property. The investment properties are mainly located in Oslo and the surrounding area, and Stavanger and Trondheim. The Group owned no investment properties outside of Norway in 2009. One property in Denmark has been reclassified from owner-occupied property to investment property. The average rental period is 6.2 years, and the portfolio of investment properties includes offices, shopping centres and education buildings. In 2009 and 2010 the Group s own valuation model has been used both in the quarterly financial statements and at year end. In addition, two independent external advisors were brought in to value selected parts of the portfolio at year end, thus ensuring that more than 90 per cent of the carrying amounts has been benchmarked against one or two externally assessed values. The Group s valuation model values each property separately. The most important inputs are yield, market rent, contractual rent, potentially vacant premises, the properties long-term normalised operating costs and any investment requirements. Yield is determined based on a normal required rate of return adjusted for the location of the property, type, technical standard and the contracts. The normal required rate of return is determined from the required rate of return that can be derived from transactions in the market, and expectations of interest level and risk adjustment. The market rent is determined from existing contracts on the property and comparable properties, observations from contractual negotiations, requests for offers and information from realtors on recently signed contracts on comparable properties. Based on market rent, contractual rent, potentially vacant premises and the long-term normalised operating costs, an annual net rent is calculated and discounted by the required rate of return in order to determine the fair value of the property. In addition corrections are made when the need for upgrades is considerable or there are planned reconstructions or rehabilitations. For 2010 the following parameters have been used in the valuation of investment property, which yield the following average value per square meter. perspektiv results NOK Yield Average market rent Average contractual rent Average value per sqm. Office and education 6.63 % 1,354.1 1,296.1 22,101.0 Shopping center 6.33 % 1,298.8 1,228.5 18,790.0 Combined portfolio 6.52 % 1,341.3 1,280.8 21,181.0 The adoption of the above parameters implies a significant level of judgement. Emphasis is put on this judgement being consistent with that observed in the market and that the judgement is applied consistently from period to period. The table below shows how the sensitivity of the yield and the market rent affects the value of the property portfolio, as it stands as at 31 December 2010. NOK million Market rent reduced by 10 % Market rent as at 31.12.2010 Market rent increased by 10 % Yield increases by 0.25 percentage point 5,328.1 5,678.8 6,029.5 Yield 6.52 per cent 5,527.4 5,900.3 6,273.2 Yield decreases by 0.25 percentage point 5,742.5 6,139.3 6,536.1 There are no restrictions with regard to the sale of the investment properties or how income and cash flows generated by the investment properties can be used. There are contractual commitments regarding development of investment properties amounting to nok 96.0 million, and also a commitment to invest nok 45.0 million in a residential development project. The latter commitment falls due in the period 2011 to 2013, depending on the progress of the project. The Group has no investment properties for leasing or classified as available for sale. There are no loans with collateral in investment properties in 2009 or 2010.

120 gjensidige annual report 2010 9 financial assets AND liabilities NOK million Notes Carrying amount as at 31.12.2010 Fair value as at 31.12.2010 Carrying amount as at 31.12.2009 Fair value as at 31.12.2009 Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 10 382.1 382.1 138.1 138.1 Financial derivatives subject to hedge accounting 10 154.5 154.5 65.1 65.1 Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 13 4,282.9 4,282.9 7,728.6 7,728.6 Bonds and other fixed income securities 18,389.9 18,389.9 15,562.4 15,562.4 Financial assets held to maturity Bonds held to maturity 14,497.5 14,923.7 15,816.0 16,321.2 Loans and receivables Bonds and other fixed income securities classified as loans and receivables 11 5,163.1 5,154.8 1,364.7 1,379.1 Loans 11 14,374.7 14,376.7 11,984.8 11,987.5 Receivables related to direct operations and reinsurance 11 3,585.1 3,585.1 3,435.8 3,435.8 Other receivables 11 342.2 342.2 303.5 303.5 Prepaid expenses and earned, not received income 11 84.5 84.5 56.9 56.9 Cash and cash equivalents 12, 26 2,889.9 2,889.9 3,103.5 3,103.5 Total financial assets 64,146.6 64,566.5 59,559.5 60,081.7 Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 10 155.3 155.3 92.9 92.9 Financial derivatives subject to hedge accounting 10 0.2 0.2 Financial liabilities at fair value through profit or loss, initial recognition Interest-bearing liabilities at fair value through profit or loss 16 303.8 303.8 1,348.9 1,348.9 Financial liabilities at amortised cost Deposits from and liabilities to customers, bank 16 9,120.0 9,120.0 6,550.4 6,550.4 Interest-bearing liabilities 16 4,951.1 4,930.4 3,567.2 3,570.8 Other liabilities 16 1,234.4 1,234.4 1,245.9 1,245.9 Liabilities related to direct insurance 16 392.5 392.5 346.4 346.4 Accrued expenses and deferred income 16 210.7 210.7 206.3 206.3 Total financial liabilities 16,367.7 16,347.0 13,358.2 13,361.8 Gain/(loss) not recognised in profit or loss 440.6 518.6 VALUATION HIERARCHY 2010 The table shows a valuation hierarchy where financial assets/liabilities measured at fair value through profit or loss are divided into three levels based on the method of valuation. NOK million LEVEL 1 LEVEL 2 Valuation techniques based Quoted prices in on observable active markets market data LEVEL 3 Valuation techniques based on non-observable market data Total Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 83.2 298.9 382.1 Financial derivatives subject to hedge accounting 154.5 154.5 Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 252.1 2,258.0 1,772.8 4,282.9 Bonds and other fixed income securities 12,148.4 6,233.0 8.5 18,389.9 Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 155.3 155.3 Financial liabilities at fair value through profit or loss, initial recognition Interest-bearing liabilities at fair value through profit or loss 303.8 303.8

gjensidige annual report 2010 121 9 FinanCial assets and liabilities (cont.) Fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm s length distance. instruments in this category are valued based on observable yield curves and estimated credit spreads where applicable. interest-bearing liabilities (banking activities) measured at fair value. These liabilities are valued based on observable credit spreads. Different valuation techniques and methods are used to estimate fair value depending on the type of financial instruments and to which extent they are traded in active markets. Instruments are classified in their entirety in one of three valuation levels in a hierarchy on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Below the different valuation levels and which financial assets/liabilities are included in the respective levels are accounted for. Quoted prices in active markets Quoted prices in active markets are considered the best estimate of an asset/liability s fair value. A financial asset/liability is considered valued based on quoted prices in active markets if fair value is estimated based on easily and regularly available prices and these prices represent actual and regularly occurring transaction transactions at arm s length distance. Financial assets/liabilities valued based on quoted prices in active markets are classified as level one in the valuation hierarchy. The following financial assets/liabilities are classified as level one in the valuation hierarchy listed shares norwegian government/government backed bonds and other fixed income securities exchange traded funds Valuation based on observable market data When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data. A financial asset/liability is considered valued based on observable market data if fair value is estimated with reference to prices that are not quoted, but are observable either directly (as prices) or indirectly (derived from prices). Valuation based on non-observable market data When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/liabilities is estimated based on valuation techniques which are based on non-observable market data. A financial asset/liability is considered valued based on non-observable market data if fair value is estimated without being based on quoted prices in active markets or observable market data. Financial assets/ liabilities valued based on non-observable market data are classified as level three in the valuation hierarchy. The following financial assets are classified as level three in the valuation hierarchy unlisted private equity investments. The private equity investments that are not organized as funds are valued using cash flow analysis, price multiples and recent market transactions. The private equity investments that are organized as funds are valued based on nav values (Net Asset Value) as reported by the fund administrators in accordance with ipev guidelines (International Private Equity and Venture capital Valuation) set out by the Equity Venture Capital Association. The nav values are estimated by the fund administrators by using the valuation techniques best suited to estimate fair value, given the actual circumstances of each underlying investment. Because of late reporting from the funds, the nav values from the previous quarterly reporting are used in estimating fair value. These values are then adjusted for known events since the last reporting date. The typical known event is the increase/decrease in value on listed shares owned by a fund. real estate funds. The real estate funds are valued based on reported nav values as reported by the fund administrators. Because of late reporting from the funds, the nav values from the previous quarterly reporting are used in estimating fair value. gjensidige s investment in Gjensidige Pensjonskasse. The investment is valued equal to the paid-in equity. perspektiv results The following financial assets/liabilities are classified as level two in the valuation hierarchy Currency futures, equity options, forward rate agreements and currency swaps, in which fair value is derived from the value of underlying instruments. These derivatives are valued using common valuation techniques for derivatives (option pricing models etc.). equity funds, bond funds, hedge funds and combination funds, in which fair value is estimated based on the fair value of the underlying investments of the funds. Bonds, certificates or index bonds that are unlisted, or that are listed but where transactions are not occurring regularly. The unlisted Sensitivity financial assets level three The sensitivity analysis for financial assets valued based on nonobservable market data show the gain/loss of realistic and plausible market scenarios. A decrease in value of ten per cent is considered a realistic and plausible market scenario for both shares and similar interests and for bonds and other fixed income securities that are included in level three in the valuation hierarchy.

122 gjensidige annual report 2010 9 FinanCial assets and liabilities (cont.) RECONCILIATION FINANCIAL ASSETS VALUED BASED ON NON-OBSERVABLE MARKET DATA (LEVEL 3) 2010 NOK million As at 1.1.2010 Net realised/ unrealised gains recognised in profit or loss Purchases Sales Settlements Transfers into or out of level 3 As at 31.12. 2010 Amount of net realised/ unrealised gains regocnised in profit or loss that are attributable to instruments held as at 31.12.2010 Shares and similar interests 1,200.9 92.5 732.3 (149.1) (103.7) 1,772.8 81.4 Bonds and other fixed income securities 9.0 (0.5) 8.5 Total 1,209.9 92.0 732.3 (149.1) (103.7) 1,781.4 81.4 Sensitivity financial assets valued based on non-obeservable market data (level3) 2010 NOK million Sensitivity Shares and similar interests Decrease in value 10 % 177.3 Bonds and other fixed income securities Decrease in value 10 % 0.9 Total 178.1 VALUATION HIERARCHY 2009 The table shows a valuation hierarchy where financial assets/liabilities measured at fair value through profit or loss are divided into three levels based on the method of valuation. NOK million LEVEL 1 LEVEL 2 Valuation techniques based Quoted prices in on observable active markets market data LEVEL 3 Valuation techniques based on non-observable market data Total Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 0.5 137.6 138.1 Financial derivatives subject to hedge accounting 65.1 65.1 Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 2,148.6 4,379.1 1,200.9 7,728.6 Bonds and other fixed income securities 9,241.0 6,312.4 9.0 15,562.4 Financial liabilities Financial derivatives 73.7 19.2 92.9 Financial derivatives at fair value through profit or loss 0.2 0.2 Financial liabilities at fair value through profit or loss, initial recognition Interest-bearing liabilities at fair value through profit or loss 1,348.9 1,348.9 RECONCILIATION FINANCIAL ASSETS VALUED BASED ON NON-OBSERVABLE MARKET DATA (LEVEL 3) 2009 NOK million As at 1.1.2009 Net realised/ unrealised gains recognised in profit or loss Purchases Sales Settlements Transfers into or out of level 3 As at 31.12. 2009 Amount of net realised/ unrealised gains regocnised in profit or loss that are attributable to instruments held as at 31.12.2009 Shares and similar interests 1,360.1 (309.0) 295.0 (97.4) (47.9) 1,200.9 (183.0) Bonds and other fixed income securities 3.6 5.4 9.0 5.4 Total 1,363.8 (303.6) 295.0 (97.4) (47.9) 1,209.9 (177.6) SENSITIVITY FINANCIAL ASSETS VALUED BASED ON NON-OBSERVABLE MARKET DATA (LEVEL 3) 2009 NOK million Sensitivity Shares and similar interests Decrease in value 10 % 120.1 Bonds and other fixed income securities Decrease in value 10 % 0.9 Total 121.0

gjensidige annual report 2010 123 10 financial derivatives and hedge accounting Market value 31.12.2010 Of this market value hedge 31.12.2010 Market value 31.12.2009 Of this market value hedge 31.12.2009 NOK million Principal 31.12. 2010 Principal average 2010 Asset Asset Principal 31.12. 2009 Principal average 2009 Asset Asset Liability Liability Liability Liability Interest-related contracts Forward contracts 13,865.5 23,415.5 4.5 (49.8) 22,614.8 16,105.1 41.8 (2.9) Interest rate futures 518.9 1,022.2 1,885.4 1,204.4 Interest rate swaps 4,007.7 4,296.4 85.9 (3.0) 5,363.5 4,225.4 4.8 (75.4) Currency-related contracts Forward contracts 16,534.1 14,862.7 439.4 (102.5) 154.5 9,770.6 10,370.4 150.3 (14.8) 65.1 (0.2) Equity-related contracts Equity options 986.3 204.8 6.8 715.7 42.1 6.4 Total financial derivatives 35,912.4 43,801.6 536.6 (155.3) 154.5 40,350.0 31,947.4 203.2 (93.1) 65.1 (0.2) Derivatives are used in accordance with «Regulations on General Insurance Companies Asset Management» in order to improve the efficiency of capital management and risk management. The principal volume of derivatives is a gross quantity, and is a measure of the extent of derivatives within the different categories of contracts. The principal average is the average gross principal volume throughout the year. The market value of assets and liabilities state the carrying amount of derivatives as at 31 December. In each asset class the individual asset managers use appropriate derivatives, and most of the financial derivatives mentioned below are used regularly. The use of derivatives is restricted by the agreement with the individual manager, and requirements are made for approved product lists and sufficient expertise and systems on the part of the manager. Short positions (undertakings to sell securities that the company does not already own, or to purchase securities without having sufficient liquid funds to complete the transaction) are normally not permitted. The manager in each asset class may never expose the company to a greater amount than specified in the management mandate. The company s overall exchange risk is hedged approximately 100 percent using currency futures. The total risk in the equity portfolio has been reduced during the year by investing in options on broad indexes instead of investing in equities. Financial derivates that constitute a part of hedgefunds are not included in the note. Interest-related contracts consist mainly of - interest rate swaps, which are agreements to exchange interest terms on nominal amounts with customers or banks. - Forward rate agreements, which are agreements that set an interest rate on a nominal amount for a future period. - interest rate futures (irf), which are agreements that secure the buyer a particular interest rate on an amount for a future period. - Bond options, which are agreements giving the right/obligation to purchase or sell bonds at a particular price at or before a future date. - Bond futures, which are agreements to purchase or sell bonds at a particular price at a future date. Currency-related contracts consist mainly of - Currency futures, which are agreements to purchase or sell a particular amount of currency at a specified exchange rate at a future date. - Currency swaps, which are agreements with banks to swap certain amounts of different currencies at a specified exchange rate and to pay interest on these amounts for an agreed period. - Currency options, which are agreements giving the right/obligation to purchase or sell currency at a specified exchange rate at a future date. Equity-related contracts consist mainly of - equity options, which are agreements giving the right/obligation to buy or sell equities at a certain price at or before a future date. - equity swaps, which are agreements to swap equities at a certain price at a future date. - equity futures, which are agreements to buy or sell equities at a certain price at a future date. Commodity-related contracts consist mainly of - Commodity options, which are agreements giving the right/obligation to buy or sell commodity futures at a certain price at or before a future date. These transactions are carried out mainly with banks as counterparties. The credit risk from these activities is considered to be marginal. Both interest-related and currency-related transactions are conducted within established position limits. Hedge accounting Gjensidige Forsikring utilizes fair value hedging of the net exposure to foreign currency. The hedging efficiency is measured per hedging object. The hedging derivatives are rolled over continously so that the principal value is approximately similar to that of the hedged object. perspektiv results

124 gjensidige annual report 2010 10 financial derivatives and hedge accounting (cont.) Fair Forsikring A/S Market value as at 1.12.10 Inefficiency recognised NOK million Principal Asset Liability in profit or loss Currency-related contracts hedging instruments 2,366.9 91.4 (0.4) Hedging object 2,366.9 Per cent 1q 2q 3q 4q Hedging efficiency prospective 100.6 % 100.6 % 100.0 % 100.0 % Hedging efficiency - retrospective 100.0 % 93.4 % 100.0 % 101.5 % The net investment in Fair Forsikring is currency hedged through currency-related contracts that are renewed every quarter at a principal equal to the value of the investment in Fair Forsikring in Gjensidige s consolidated financial statements. The credit risk associated with the hedging derivatives is within the limits of Gjensidige s credit policy. The effect of the hedge accounting is a loss on the hedging derivatives of nok 162.0 million, which is recognised as exchange rate differences on the net investment. Nykredit Forsikring A/S Market value as at 1.12.10 Inefficiency recognised NOK million Principal Asset Liability in profit or loss Currency-related contracts hedging instruments 2,386.5 63.1 4.3 Hedging object 2,229.7 Per cent 1q 2q 3q 4q Hedging efficiency prospective N/A N/A N/A 100.0 % Hedging efficiency retrospective N/A N/A N/A 107.4 % Gjensidige Forsikring asa initiated hedge accounting of the currency exposure of the net investment in the fully owned subsidiary Nykredit Forsikring A/S on 1 Oktober 2010. The net investment in Nykredit Forsikring is hedged through currency-related contracts that are renewed every quarter at a principal equal to the value of the investment in Nykredit Forsikring in Gjensidige s consolidated financial statements. The credit risk associated with the hedging derivatives is within the limits of Gjensidige s credit policy. The effect of the hedge accounting is a loss on the hedging derivatives of nok 58.7 million, which is recognised as exchange rate differences on the net investment.

gjensidige annual report 2010 125 11 loans AND receivables NOK million 2010 2009 Mortgage loans 11,016.4 8,904.7 Other loans 773.3 461.9 Provision for impairment losses (121.8) (21.6) Impairment to fair value (31.2) (42.1) Subordinated loans 8.3 9.6 Loans for consumer goods 2,729.6 2,672.2 Bonds classified as loans and receivables 5,163.1 1,364.7 Total loans and other receivables 19,537.8 13,349.5 Mortgage loans consist mainly of loans from the Gjensidige Bank Group. Primarily this is loans with floating interest to customers in the private segment. Other loans are primarily interest-free loans to agricultural customers. The loans are in their entirety intended for installment of fire detection systems with these customers. There is no mortgage attached to the loans, and the terms varies from two years to over 20 years. Gjensidige Forsikring has not offered this type of loan to its customers in 2010 or 2009. The default rate is 1.5 per cent at year end, compared to 0.76 per cent in 2009. Discounting has been conducted in order to take into account the fact that the loans are non-interest-bearing. The discount rate used is 4.66 per cent. On 15 December 2009 Gjensidige Bank acquired Citibank s Norwegian portfolio of loans for consumer goods, and as at 31 December the portfolio of loans for consumer goods consist mainly of this portfolio. The portfolio of loans for consumer goods is spread across Norway. Bonds are securities classified as loans and receivables in accordance with ias 39. perspektiv results NOK million 2010 2009 Assets in life insurance with investment options 4,503.6 2,823.4 Total assets in life insurance with investment options 4,503.6 2,823.4 Assets in life insurance with investment options consist of equity funds, money market funds, bond funds, combination funds and bank deposits. These assets belong to the customers and the customers bear all risk associated with the investments. A corresponding amount is thus carried as a liability under Liabilities in life insurance with investment options. NOK million 2010 2009 Receivables from policy holders 3,540.5 3,373.8 Receivables related to reinsurance 44.6 62.0 Total receivables related to direct operations and reinsurance 3,585.1 3,435.8 Gjensidige considers the credit and liquidity risk associated with policy holders to be small, since the outstanding amount per policyholder is relatively small. Provisions for potentially irrecoverable amounts have been made. Receivables related to reinsurance arise when Gjensidige issues claims towards reinsurers in accordance with reinsurance contracts. Provision for potentially irrecoverable amounts has been made. Note 3 table 21 shows the age distribution of this receivables. NOK million 2010 2009 Receivables in relation with property 11.3 26.8 Receivables in relation with asset management 29.3 154.8 Receivables regarding to Gjensidigestiftelsen 1 34.4 Other receivables and assets 267.2 121.9 Total other receivables 342.2 303.5 1 See note 22 related party transactions. A considerable amount of receivables in relation with asset management as at 31 December 2010 is short-term receivables in relation with sale of securities. NOK million 2010 2009 Earned, not received interest income 59.5 16.0 Other prepaid expenses and earned, not received income 25.1 40.9 Total prepaid expenses and earned, not received income 84.5 56.9

126 gjensidige annual report 2010 12 cash AND cash EQuivaleNts NOK million 2010 2009 Deposits with financial institutions 217.1 268.7 Cash and bank deposits 2,672.8 2,834.8 Total 2,889.9 3,103.5 Cash and bank deposits are cash and bank deposits available for day to day business. Deposits with financial instistutions consist of short-term currency deposits and other short-term credit deposits. Weighted average rate for interest earned on cash, bank deposits and deposits with financial institutions is approximately 3,1 percent (2009: app. 3,3 per cent). 13 shares AND similar INterests NOK million Interest held beyond 10 % 31.12.2010 Gjensidige Forsikring asa Norwegian financial shares DnB nor asa 17.6 Total Norwegian financial shares 17.6 Other Norwegian shares Statoil asa 33.2 Orkla asa 31.1 Norsk Hydro asa 23.3 Petroleum Geo-Services asa 19.9 Schibsted asa 11.0 Yara International asa 10.1 Telenor asa 10.0 Odfjell se 6.1 Norwegian Air Shuttle asa 5.8 Renewable Energy Corporation asa 5.7 Marine Harvest asa 5.1 Aker Solutions asa 5.0 Total other Norwegian shares 166.1 Other foreign shares ABB se 17.0 SeaDrill Ltd 15.9 Øvrige utenlandske aksjer 0.1 Total other foreign shares 33.0 Equity funds Storebrand Global Indeks I 542.9 Capital Intl Emerging Mkt-I $ 270.3 Valueinvest Lux glb-ic 185.6 DnB nor Globalspar ii 0.2 Total equity funds 998.9 Private equity investments Fsn Capital ii lp 129.3 HitecVision Private Equity V lp 106.4 HitecVision Private Equity IV lp 85.6 Altor Fund ii lp 83.2 Northzone V KS 61.5 Norvestor V lp 55.5 Norvestor IV lp 49.1 Argentum Secondary ii 46.6 Partners Group European Buyout 2005 (A) lp 46.1 Energy Ventures ii KS 44.3 Northzone IV KS 10.8 % 43.5 Energy Ventures iii lp 34.7 Partners Group Direct Investments 2006 lp 27.5 Verdane Capital VI KS 10.0 % 27.3

gjensidige annual report 2010 127 13 SHares and similar interests (cont.) NOK million Interest held beyond 10 % 31.12.2010 lgt Crown European Private Equity plc 22.7 Energy Ventures ii B is 17.4 % 22.3 Viking Venture ii as 21.9 Viking Venture iii dis 20.4 NeoMed Innovation IV lp 19.6 BaltCap pef lp 17.5 Teknoinvest Viii KS 13.9 % 16.5 Convexa Capital Viii as - klasse B 15.9 HitecVision Asset Solution KS 12.1 CapMan BO IX lp 11.0 Teknoinvest Viii B dis 15.7 % 9.2 Energy Ventures is 17.5 % 9.0 Fjord Invest as 8.9 Verdane Capital V B KS 8.8 Viking Venture as 8.2 Verdane Capital Vii KS 6.4 Nordic pep 1 is (Altor fund iii) 12.3 % 5.6 Northzone VI L.P. 5.0 Kapnord Fond as 4.7 Viking Venture ii B is 16.9 % 4.3 Helgeland Vekst as 4.0 Tun Media (Landbrukets Medieselskap as) 3.7 Convexa Capital IV - B-aksjer 3.1 BTV Investeringsfond as 3.0 Convexa Capital IV 2.8 Norchip as 2.5 Rogaland Kunnskapsinvest 2.5 Norinnova 2.1 Berger Eiendom 1.7 Convexa Capital VI as - klasse B 1.5 Såkorninvest Sør 1.5 Norinnova Invest as 1.3 Midvest I A 1.2 Other private equity investments 5.5 Total private equity investments 1,127.2 perspektiv results Hedgefunds Winton Futures Fund- Lead Series 180.0 Sector Polaris 144.2 The Winton Evolution Fund 112.9 Sector EuroPower Fund Class A eur 81.0 Sector Healthcare - A usd 79.3 Winton Evolution fund, Class H- Euro 67.3 Sector Speculare IV Fund Class A usd 42.8 Sector Exspec Fund Class A usd (utfisjonert sels.) 20.5 HoriZon tactical trad usd-b (in specie rest verdi) 12.6 Sector Speculare ii Fund Class A usd 11.4 Russell Alt. Strat. Fund ii Total Designated Inves 4.7 Total hedgefunds 756.6 Real estate funds Cerep ii 69.6 Cerep iii 63.6 Cerep 25.4 La Salle 17.9 Total real estate funds 176.4 Combination funds Fortis L Fund-BD ConV Wrld-I 523.2 Total combination funds 523.2

128 gjensidige annual report 2010 13 SHares and similar interests (cont.) NOK million Interest held beyond 10 % 31.12.2010 Other investments Gjensidige Pensjonskasse 94.7 % 111.0 Total other investments 111.0 Other branches Shares and similar interests owned by Gjensidige Forsikring asa, Danish branch 2.1 Total shares and similar interests owned by other branches 2.1 total shares AND similar INterests owned BY gjensidige forsikring asa 3,912.2 other group companies Shares and similar interests owned by Gjensidige Pensjonsforsikring as 41.6 Shares and similar interests owned by Gjensidige Bank asa 241.8 Shares and similar interests owned by Nykredit A/S 5.6 Shares and similar interests owned by Glitne Invest as 31.8 Shares and similar interests owned by Oslo Areal as 49.9 Total shares and similar interests owned BY other group companies 370.7 total shares AND similar INterests owned BY the gjensidige INsuraNce group 4,282.9 14 INsuraNce-related liabilities AND reinsurers share NOK million 2010 2009 Short-term insurance contracts, gross Provision for unearned premiums, gross 9,078.3 7,671.7 Claims reported and claims handling costs 13,765.0 13,609.7 Claims incurred, but not reported 14,574.4 12,247.5 Total claims provision, gross 28,339.3 25,857.2 Other insurance related provisions 119.0 69.7 Total insurance-related liabilities, gross 37,536.6 33,598.6 Short-term insurance contracts, reinsurers share Reinsurers share of unearned premiums, gross 27.6 12.6 Claims reported and claims handling costs 362.4 218.6 Claims incurred, but not reported 97.0 8.1 Total reinsurers' share of claims provision, gross 459.4 226.7 Total reinsurers' share of insurance-related liabilities, gross 487.0 239.3 Short-term insurance contracts, net of reinsurance Provision for unearned premiums 9,050.7 7,659.1 Claims reported and claims handling costs 13,402.6 13,391.1 Claims incurred, but not reported 14,477.3 12,239.4 Total claims provision, net of reinsurance 27,879.9 25,630.5 Total insurance-related provisions 119.0 69.7 Total insurance-related liabilities, net of reinsurance 37,049.6 33,359.4

gjensidige annual report 2010 129 14 insurance-related liabilities and reinsurers SHare (cont.) 2010 2009 Movements in insurance-related liabilities and reinsurers share Gross Reinsurers share Net of reinsurance 1 Gross Reinsurers share Net of reinsurance 1 Claims and claims handling costs Claims reported and claims handling costs 13,609.7 (218.6) 13,391.1 13,246.0 (306.3) 12,939.7 Claims incurred, but not reported 12,247.5 (8.1) 12,239.4 12,315.5 (56.5) 12,259.0 Total as at 1 January 25,857.2 (226.7) 25,630.5 25,561.5 (362.7) 25,198.8 Acquisitions through business combinations 1,133.2 (50.6) 1,082.6 31.3 (5.1) 26.2 Claims paid, prior year claims (6,258.8) 118.7 (6,140.1) (5,672.0) 181.5 (5,490.5) Increase in liabilities Arising from current year claims 14,284.9 (455.2) 13,829.6 12,456.0 (28.6) 12,427.4 - of this paid (6,033.0) 135.7 (5,897.3) (5,602.3) 12.2 (5,590.1) Arising from prior year claims (run-off) (314.0) 12.8 (301.1) (292.8) (17.3) (310.2) Other changes, including effects from discounting (20.4) (20.4) 283.4 0.4 283.8 Exchange differences (309.8) 5.8 (304.0) (907.8) (7.1) (914.9) Total as at 31 December 28,339.3 (459.4) 27,879.9 25,857.2 (226.7) 25,630.5 Claims reported and claims handling costs 13,765.0 (362.4) 13,402.6 13,609.7 (218.6) 13,391.1 Claims incurred, but not reported 14,574.4 (97.0) 14,477.3 12,247.5 (8.1) 12,239.4 Total as at 31 December 28,339.3 (459.4) 27,879.9 25,857.2 (226.7) 25,630.5 perspektiv results Provisions for unearned premiums, gross, short-term insurances As at 1 January 7,671.7 (12.6) 7,659.1 6,760.9 (15.6) 6,745.3 Additions through acquisitions 855.7 (0.3) 855.4 Increase in the period (17,224.3) 427.0 (16,797.3) (15,148.9) 399.1 (14,749.8) Release in the period 17,841.4 (442.3) 17,399.1 16,175.3 (398.5) 15,776.7 Exchange differences (66.3) 0.6 (65.7) (115.5) 2.4 (113.2) Total as at 31 December 9,078.3 (27.6) 9,050.7 7,671.7 (12.6) 7,659.1 1 Net of reinsurance. NOK million 2010 2009 Discounted claims provision, gross - Gjensidiges Arbejdsskadeforsikring A/S 3,515.4 3,625.9 Non discounted claims provision, gross - Gjensidiges Arbejdsskadeforsikring A/S 4,853.0 5,235.6 The claims provisions shall cover future claims payments. The claims provisions for Gjensidiges Arbejdsskadeforsikring A/S are converted to present value (discounted), whereas other provisions are undiscounted. The reason why the claims provisions for Gjensidiges Arbejdsskadeforsikring A/S are discounted is that this portfolio consists exclusively of Danish workers compensation business with very long payment flows and substantial future interest income. The claims for occupational injuries in Denmark are paid either as annuities or as lump-sum indemnities (which are calculated mainly as discounted annuities). Therefore, it is most expedient to regard the whole portfolio as annuities. The discount rate that is used has been determined by Finanstilsynet (the Financial Supervisory Authority) in Denmark pursuant to Danish accounting standards (Danish gaap ).

130 gjensidige annual report 2010 15 Pension Gjensidige Forsikring is required to have an occupational pension plan pursuant to the Mandatory Occupational Pension Act. The company s pension plans meet the requirements of the Act. The defined benefit plan is a closed arrangement. New employees become members of the defined contribution plan. DEFINed contribution plan Defined contribution plan is a private pension plan which is a supplement to the National Insurance. Contributions from the pension plan come in addition to retirement pension from the National Insurance. The retirement age is 67 years. The plan also includes disability pension and spouse and child s pension subject to specific rules. In Gjensidige Forsikring the employees are given contributions in accordance with the limits for tax-free contributions, at the time being five per cent of salary from 1 to 6 of the social security base amount and eight per cent from 6 to 12 of the social security base amount. Some of Gjensidige Forsikring s branches and subsidiaries have similar defined contribution plans as Gjensidige Forsikring. Contribution to the defined contribution plan is recognised as an expense in the financial year in which the contribution is paid. Amount recognised as expense for the defined contribution plan is nok 81.2 million (69.6). DEFINed BENefit plan The retirement pension together with contributions from the National Insurance and taken into consideration paid-up policies, constitutes about 70 per cent of salary at retirement age, provided a completed contribution time of 30 years. The retirement age is 67 years, while as for the underwriters a retirement age of 65 years applies. The plan also includes disability pension and spouse and child s pension subject to specific rules. In addition, Gjensidige Forsikring has pension liabilities beyond the ordinary collective plan for some employees. This applies to employees with a lower retirement age, employees with salaries above 12 times the social security base amount and supplementary pensions. Pension liabilities are measured at the present value of future pension benefits that for accounting purposes are considered as accrued at the reporting date. Future pension benefits are calculated on the basis of expected salary at the time of retirement. Estimated liability at the reporting date is used when measuring accrued pension liability. Plan assets are measured at fair value. For the valuation of pension funds, estimated value at the reporting date is used. Net pension liability is the difference between the present value of the pension liability and the fair value of the plan assets. A provision is recognised for employers national insurance contributions in periods of underfunding. Net pension liability is presented in the balance sheet under the line Pension liabilities. Difference between estimated pension liability and estimated value of plan assets as at last financial year and estimated pension liability and fair value of plan assets as at the beginning of this year is recognised in other comprehensive income. In the calculation for 2009 a combination of a declining salary and turnover trend, and a higher discount rate, yielded a positive effect on equity of about nok 400 million. In 2010 a combination of a reduced discount rate and salary adjustment yielded a negative effect on equity of more than nok 100 million. The group expects to contribute nok 119.4 million to the defined benefit plan in 2011 (205.8).

gjensidige annual report 2010 131 15 Pension (cont.) NOK million 2010 2009 Present value of the defined benefit obligation As at 1 January 2,765.6 3,100.7 Adjustment of opening balance (9.9) Current service cost 73.4 88.2 Interest cost 105.4 105.6 Actuarial gains and losses 115.8 (412.7) Benefits paid (139.2) (138.9) Past service costs (96.6) 0.4 Business combinations (38.1) 41.3 Foreign currency exchange rate changes (2.9) (9.1) As at 31 December 2,783.4 2,765.6 Amount recognised in the balance sheet Present value of unfunded plans 432.7 503.9 Present value of funded plans 2,350.8 2,261.7 Present value of the defined benefit obligation 2,783.4 2,765.6 Fair value of plan assets (2,160.2) (2,080.7) Net defined benefit obligation 623.3 684.9 Employers' national insurance contributions 82.0 89.5 Liability recognised in the balance sheet for defined benefit obligation 705.3 774.4 Fair value of plan assets As at 1 January 2,080.7 1,858.1 Adjustment of opening balance (12.5) Expected return on plan assets 119.0 106.6 Actuarial gains and losses 16.5 (23.7) Contributions by the employer 116.2 256.5 Benefits paid (140.6) (135.9) Business combinations (31.6) 31.6 As at 31 December 2,160.2 2,080.7 perspektiv results Expense recognised in profit or loss Current service cost 73.4 88.2 Interest cost 105.4 105.6 Expected return on plan assets (119.0) (106.6) Past service cost (96.6) 0.4 Business combinations 1.4 Employers' national insurance contributions (5.2) 12.9 Total defined benefit pension cost (42.0) 101.9 The expense is recognised in the following line items in the income statement Total operating expenses (42.0) 101.9 Actuarial gains and losses recognised in other comprehensive income Cumulative amount as at 1 January (2,005.9) (2,448.6) Recognised during the period (118.0) 442.7 Cumulative amount as at 31 December (2,124.0) (2,005.9) Plan assets comprise Certificates 11.7 % Corporate bonds 11.8 % 11.1 % Money market funds 78.8 % 70.9 % Properties 6.2 % 5.7 % Other 3.3 % 0.6 % Total plan assets 100.0 % 100.0 % Expected rates of return on plan assets Certificates 2.7 % 2.0 % Corporate bonds 8.0 % 9.0 % Money market funds 5.5 % 5.0 % Properties 2.7 % 2.5 % Other 6.0 % 6.0 % Andre 7.0 % 10.0 %

132 gjensidige annual report 2010 15 Pension (cont.) Expected rates of return on plan assets are based on current asset allocations. Expected return is determined in conjunction with external advisers and takes into account both current and future market expectations when these are available, and historical returns. The actual return on plan assets amounted to 6.57 per cent I 2010 (12.52). The discount rate is based on ten years government bonds in Norway, adjusted for the duration of the pension liabilities. The discount rate is the assumption that has the largest impact on the value of the pension liability. Salary increases, pension increases and change in social security base amount are based on historical observations and expected future inflation. Due to an average age of above 50 years on employees in the defined benefit plan the salary increase does not contain a career addition, and determined salary increase can therefore be lower than in the market in general. The decreasing salary trend applied for 2010 gives an average salary increase of 3.5 per cent. 2010 2009 Actuarial assumptions Discount rate 3.70 % 4.20 % Expected return on plan assets 5.80 % 5.80 % Future salary increases 3.50 % 3.80 % Change in social security base amount 3.25 % 3.70 % Future pension increases 2.00 % 2.10 % Employers national insurance contributions 14.10 % 14.10 % Staff turnover before/after 40 years Decreasing Decreasing Probability of AFP early retirement N/A 31,00 % Sensitivity +1 %-point discount rate - 1 %-point + 1 %-point salary discount rate adjustment - 1 %-point salary adjustment 2010 Change in pension benefits accrued during the year (16.2 %) 22.9 % 20.0 % (15.0 %) Change in pension liability (11.8 %) 15.1 % 6.4 % (5.7 %) 2009 Change in pension benefits accrued during the year (17.7 %) 17.0 % 14.4 % (15.0 %) Change in pension liability (12.1 %) 13.1 % 5.1 % (5.7 %) NOK million 2010 2009 2008 2007 2006 Historical information Present value of the defined benefit obligation 2,783.4 2,765.6 3,100.7 2,746.8 2,177.3 The fair value of the plan assets (2,160.2) (2,080.7) (1,858.1) (1,660.5) (1,357.0) Deficit in the plan 623.3 684.9 1,242.6 1,086.3 820.3 CONtractual pension (afp) The liability to pay own risk according to the former arrangement is accounted for as a business specific defined benefit plan. Own risk are still to be paid until the pension liability is fulfilled for the company s own early retirees choosing the former AFP plan. Pension liability for former employees that have chosen to retire before 1 January 2011 is fulfilled as originally planned until everybody has reached 67 years. Hence there will not be a settlement for this group of employees. All employees turning 62 years after 1 January 2011 are entitled to apply for pension according to new AFP arrangement as from 1 January 2011. This implies that the liability regarding earned rights is fully repealed. New AFP constitutes a lifelong addition to retirement pension from the National Insurance and is estimated based on pensionable salary including the year in which he or she is 61 years. AFP can earliest be applied for from the age of 62 years. Yearly AFP will increase by a higher age of withdrawal. AFP is a defined benefit pension plan and should intentionally be accounted for as a pension liability in the balance sheet. There is, however, not sufficient information to recognize a liability in the financial statements for 2010 and the arrangement is therefore recognised as a defined contribution plan. The transition to new AFP arrangement is accounted for as a negative past service cost of nok 96.6 million and is recognised as income in 2010. No premium to the Fellesordningen for lo/nho is paid for 2010.

gjensidige annual report 2010 133 16 provisions AND other liabilities NOK million 2010 2009 Restructuring costs 1 54.7 72.1 Other provisions 83.8 100.0 Total other provisions for liabilities 138.5 172.1 Deposits from and liabilities to customers without maturity date, bank 8,902.8 6,417.3 Deposits from and liabilities to customers with maturity date, bank 217.3 133.1 Deposits from and liabilities to customers 9,120.0 6,550.4 Cash credit 52.5 36.2 Liabilities to credit institutions, bank 513.1 513.1 Certificates and other short-term loan instruments, bank 1,049.8 2,369.3 Bonded debt, bank 3,639.5 1,997.5 Total interest-bearing liabilities 5,254.9 4,916.1 Outstanding accounts Fire Mutuals 190.2 165.2 Accounts payable 100.4 68.0 Liabilities in relation with properties 26.5 63.6 Liabilities in relation with asset management 200.7 Liabilities to public authorities 466.6 359.3 Other liabilities 450.7 389.0 Total other liabilities 1,234.4 1,245.9 perspektiv results Liabilities related to direct insurance 295.8 288.8 Liabilities related to reinsurance 96.7 57.6 Total liabilities related to insurance 392.5 346.4 Liabilities in life insurance with investment options 4,503.6 2,823.4 Total liabilities in life insurance with investment options 4,503.6 2,823.4 Liabilities to public authorities 22.6 20.9 Other accrued expenses and deferred income 188.1 185.4 Total accrued expenses and deferred income 210.7 206.3 Restructuring costs 1 Provision as at 1 January 72.1 8.0 New provisions 25.0 72.1 Provisions used during the year (42.4) (8.0) Provision as at 31 December 54.7 72.1 1 1 In 2010 it has been decided to make a new provision of nok 25.0 million in association with the ongoing efficiency improvement measures of Commercial functions. these processes have been communicated to all business areas involved. During 2010 nok 42.4 million of the provisions of nok 64.4 million from 2009 has been used. 17 tax NOK million 2010 2009 Spcification of tax expense Tax payable (619.2) (796.6) Wealth taxes (36.0) Correction previous years 73.1 0.1 Change in deferred tax 242.5 (29.3) Total tax expense (303.6) (861.8) Deferred tax liabilities and deferred tax assets Deferred tax liabilities and deferred tax assets are offset when there is a legally enforceable right to offset those assets/liabilities and when deferred tax liabilities/ deferred tax assets relate to the same fiscal authority. The amounts offset are as follows Taxable temporary differences Intangible assets 429.2 Shares, bonds and other securities 295.5 129.7 Properties 1,827.9 1,258.9 Security provisions etc. 2,973.7 2,974.9 Profit and loss account 365.4 496.8 Total taxable temporary differences 5,462.6 5,289.5

134 gjensidige annual report 2010 17 tax (cont.) NOK million 2010 2009 Deductible temporary differences Intangible assets (555.5) Loans and receivables (101.8) (148.0) Plant and equipment (115.7) (124.8) Provisions for liabilities (62.3) (69.1) Claims provision (15.3) (23.4) Other deductible temporary differences (6.3) (1.7) Pension liabilities (699.9) (708.5) Total deductible temporary differences (1,556.9) (1,075.6) Net temporary differences 3,905.7 4,213.9 Loss carried forward (18.4) (15.8) Disparagement of deferred tax assets 3.1 137.0 Net taxable temporary differences 3,890.4 4,335.2 Deferred tax liabilities/(deferred tax assets) 1,075.1 1,205.6 Of this non-assessed deferred tax assets 199.4 Deferred ntax liabilities 1,274.6 1,205.6 Reconciliation of tax expense Profit before tax 3,254.0 3,166.5 Estimated tax of profit before tax expense (28 %) (911.1) (886.6) Tax effect of Tax rate different from 28 % and change in tax rate 28.1 8.0 Disparagement and reversal of loss carried forward in subsidiaries 22.5 Dividend received 3.4 (0.1) Tax exempted income and expenses 53.2 (17.1) Associates 136.9 73.7 Impairment loss on goodwill and recognition of negative goodwill (31.1) (22.5) Non deductible expenses (17.3) (3.8) One-time effect of tax relief decision 333.0 Other permanent differences 28.3 Wealth taxes (36.0) Correction previous years 73.1 0.1 Total tax expense (303.6) (861.8) Effective rate of income tax 9.3 % 27.2 % Loss and dividend tax deduction carried forward 2011 2012 0.2 2013 0.3 2014 0.2 2015 0.2 2016 0.2 Later or no due date 77.0 3.3 Total loss and dividend tax deduction carried forward 77.0 4.5 Change in deferred tax Deferred tax liabilities as at 1 January 1,205.5 987.4 Change in deferred tax recognised in profit or loss (242.5) 29.3 Change in deferred tax recognised directly in the balance sheet Pensions (33.1) 124.0 Hedge accounting 20.2 71.8 Companies sold and purchased 148.7 (2.5) Other changes in deferred tax (21.9) Exchange differences (1.9) (4.4) Deferred tax liabilities as at 31 December 1,075.1 1,205.6 Tax recognised in other comprehensive income Pensions 33.1 (124.0) Deferred tax on hedge accounting 20.2 (71.8) Tax payable on hedge accounting 41.6 (58.4) Tax payable on dividend expenses 13.2 Total tax recognised in other comprehensive income 108.2 (254.1)

gjensidige annual report 2010 135 17 tax (cont.) tax expense In connection with the conversion of Gjensidige Forsikring BA to a public limited company the Ministry of Finance has consented to an exemption from capital gains taxation on the transfer of business to the newly formed public limited company under certain conditions. The consequences of the tax relief decision have been incorporated into the tax expense and tax liabilities from the current quarter. The tax relief decision involves greater complexity and discretionary assessments, which entails a greater degree of uncertainty with respect to the tax expense and tax liabilities until all the effects have ultimately been evaluated by the tax authorities. 18 EXpeNses OPERATING EXpeNses NOK million 2010 2009 Depreciation and value adjustments (note 5 and note 7), excl. depreciation properties 468.8 399.2 Employee benefit expenses (note 19) 1,855.8 1,772.0 Fee for customer representatives 7.1 6.9 Software costs 375.2 336.2 Total auditor s fee (incl. Vat) 16.7 15.0 Consultants and lawyers fees 114.0 109.4 Commissions 655.9 416.4 Other expenses 591.8 775.6 Total operating expenses 4,085.3 3,830.8 perspektiv results EXpeNses related to INvestMENts NOK million 2010 2009 Depreciation and value adjustments (note 5 and note 7) 6.5 47.7 Employee benefit expenses (note 19) 14.4 14.9 Software costs 0.3 0.8 Auditor s fee 1.4 1.8 Consultants and lawyers fees 4.7 2.1 Other expenses 115.0 88.5 Total expenses related to investments 142.4 155.9 other specifications NOK million 2010 2009 Auditor's fee (incl. vat) Statutory audit 9.6 11.2 Other non-assurance services 8.3 4.3 Tax consultant services 0.1 1.4 Total auditor's fee (incl. vat) 18.1 16.8 Employee benefit expenses Wages and salaries 1,536.3 1,366.9 Social security cost 287.3 243.7 Pension cost - defined contribution plan (note 15 incl. employers national insurance contribution) 81.2 69.6 Pension cost - defined benefit plan (note 15 incl. employers national insurance contribution) (42.0) 101.9 Stock purchase offering for employees allocated in 2010 7.5 Total employee benefit expenses 1,870.3 1,782.1

136 gjensidige annual report 2010 19 salaries AND remuneration 2010 2009 Average number of employees 4,008 3,750 The Board of Directors statement on determining salaries and other remuneration Gjensidige s remuneration policy The Group has established a remuneration scheme that applies to all employees. Remuneration shall be competitive, but not wage leading. It is expected that the employees will view the Group s offer of remuneration and benefits as a total package. The Group s remuneration schemes shall be open and performance-based so that they are regarded as fair and predictable to the greatest possible extent. There shall be conformity between agreed performance and the remuneration that is given. Remuneration and career development shall be associated with the achievement of the Group s expressed strategic and financial goals and core values, where both quantitative and qualitative objectives are included in the assessment. The measurement criteria shall promote long-term economic growth and take the actual capital costs into consideration as much as possible. The remuneration scheme shall help promote and provide incentives for good risk management, counteract excessive risk-taking and avoid conflicts of interest. A regular basic salary shall be the main element in the overall remuneration, which also consists of bonus, pension and benefits in kind. Decision-making process The Board of Directors has established a remuneration committee composed of three members; the chairman of the Board of Directors and two board members. The remuneration committee shall prepare items of business for the Board of Directors and have the main responsibility for: draft proposals for and monitor the compliance with the Group s guidelines for and constraints on remuneration annually assess and propose the group Ceo s remuneration annually draft a proposal for the group Ceo s personal scorecard Be an adviser to the group Ceo with regard to the annual assessment of remuneration of the rest of the executive management draft proposals for principles and a statement on determining salaries and other remuneration for the executive management, for employees and their elected representatives with job tasks of crucial importance to the enterprise s risk exposure, and for other employees and elected representatives with supervisory tasks assess other important personnel-related matters concerning executive management Guidelines for the coming financial year Remuneration of the group ceo The group Ceo s salary and other financial benefits are determined by the Board of Directors on the basis of a comprehensive assessment, where Gjensidige s remuneration scheme and the market pay for equivalent positions are taken into consideration. The basic salary is assessed annually and determined on the basis of the wage trend in the society in general and the financial sector in particular. The bonus is determined by the Board of Directors on the basis of agreed objectives and deliveries and can amount to 50 per cent at most of the regular annual salary, included holiday pay. Variable salary is not included in the pensionable income. In the assessment, consideration is given to the enterprise s results in the last two years, together with an assessment of the group Ceo s personal contributions to the Group s core values, development and results. Half of the bonus is given in the form of shares in Gjensidige Forsikring asa, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. The group Ceo is not given any performance-based benefits in addition to the abovementioned bonus, but can also be given benefits in kind, such as a company car and coverage of expenses for electronic communication. The awarding of benefits in kind shall be contingent upon the group Ceo s function in the Group and must also be in keeping with current market practices. The group Ceo has a retirement age of 62. The group Ceo has the option to retire at age 60 if the Board of Directors or he himself so desires. The group Ceo is entitled to a pension in accordance with Gjensidige s closed defined-benefit pension scheme. In accordance with his employment contract, he is entitled to a pension of 100 per cent of his annual salary upon retirement at age 62, which will subsequently be reduced to 70 per cent of his salary upon reaching age 67 and thereafter. In the event of retirement at age 60, there will be a corresponding contractual reduction from 100 per cent upon retirement to 70 per cent upon turning 67. The company car scheme and other benefits will be maintained until the age of 67. The group Ceo has no severance pay agreement if he resigns before reaching retirement age. Remuneration of the rest of the executive management The group Ceo determines the financial terms and conditions for the rest of the executive management according to limits that have been discussed with the remuneration committee. Gjensidige s remuneration scheme is used as a basis for these calculations. The total remuneration is determined by the need to offer competitive terms and conditions in the various business areas and shall help attract and retain managers who promote the Group s growth and profitability. The basic salary is assessed annually and determined on the basis of the wage trend in the society in general and the financial sector in particular. The bonuses to the executive management can be paid on the basis of specific performance indicators of defined target areas and discretionary assessments specified in the personal scorecards and derived from the Group s strategies and objectives. In this assessment, consideration is given to a combination of the enterprise s results in the last two years, the business unit in question and an assessment of personal contributions. Half of the bonus is given in the form of shares in Gjensidige Forsikring asa, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. An upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. The Deputy Ceo has a bonus agreement equivalent to the group Ceo s agreement, where the bonus can amount to 50 per cent at most of his/her regular annual salary. After consultation with the remuneration committee, the group Ceo may make exceptions for the remuneration of special positions if it is necessary in order to offer competitive terms. Awarding of benefits in kind to executive management shall be contingent upon their function in the Group and also in keeping with marketing practices. Members of the group management have a retirement age of 62. With

gjensidige annual report 2010 137 19 salaries and remuneration (Cont.) only two exceptions, current members of the group management are members of the closed defined-benefit pension scheme. With a full contribution period, these members are entitled to a pension of 70 per cent. The Company will maintain a previous individual pension agreement for one member of the group management.there are no severance pay agreements for managers who resign their position in Gjensidige. paid in the form of shares in Gjensidige Forsikring asa, one-third of which can be sold in each of the next three years. An upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. Remuneration of employees with job tasks of crucial importance to the enterprise s risk exposure The bonuses to employees with job tasks of crucial importance to the enterprise s risk exposure can be paid on the basis of specific performance indicators of defined target areas and discretionary assessments specified in the personal scorecards and derived from the Group s strategies and objectives. In this assessment, consideration is given to a combination of the enterprise s results in the last two years, the business unit in question and an assessment of personal contributions. Half of the bonus is given in the form of shares in Gjensidige Forsikring asa, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. An upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. After consultation with the remuneration committee, the group Ceo can make exceptions for the remuneration of special positions if it is necessary in order to provide competitive terms. The awarding of pensions and benefits in kind complies with the Group s general scheme. Remuneration of employees with supervisory tasks Remuneration of employees with supervisory tasks shall be independent of the results in the operations they supervise. The bonus to employees with supervisory tasks will be based on a discretionary assessment of contributions from the unit in question specified in personal scorecards, plus other personal contributions. Half of the bonus is The awarding of pensions and benefits in kind complies with the Group s general scheme. Remuneration of elected representatives and other employees with remuneration equivalent to executive management The guidelines apply equivalently to elected representatives with job tasks of crucial importance to the enterprise s risk exposure and elected representatives with other supervisory tasks. After a specific assessment, these guidelines may also come into force for other employees with equivalent job tasks and remuneration. Binding guidelines for shares, underwriting rights, etc. for the coming financial year Of bonuses earned in 2011 by the group Ceo, executive management, employees with job tasks of crucial importance to the enterprise s risk exposure and employees with supervisory tasks, a percentage equivalent to 50 per cent of the gross bonus earned will be invested in shares in Gjensidige Forsikring asa. Up to 1/3 of the shares may be sold in each of the three coming years. On an equivalent basis with the other employees in Gjensidige, the group Ceo and executive management will be entitled to take part in any share subscription schemes that exist for the employees. Explanation of the executive pay policy in the previous financial year The Board of Directors confirms that the guidelines for executive pay for 2010 presented in last year s statement have been complied with. perspektiv results Key management personell compensation 2010 NOK thousand Fixed salary/fee Variable salary Calculated value of total benefits other than cash Rights earned in the financial year according to defined benefit pension plan 9 Loans, advance payments, guarantees. outstanding amount Number of shares held Interest rate 7 Applicable conditions and installment plan Retirement conditions The Senior Group Management Helge Leiro Baastad, Ceo 4,129.3 1,277.6 254.1 1,586.3 6,213 2 Tor Magne Lønnum, Deputy Ceo 2,913.7 1,397.0 218.1 663.9 4,213 3 Jørgen Inge Ringdal, Executive Vice President 2,145.5 435.8 194.5 705.5 3,835 2 Trond Delbekk, Executive Vice President 2,390.9 381.7 233.6 658.0 2,319 3 Bjørn Walle (1.1.10-31.8.10) 1, Executive Vice President 1,321.9 269.4 163.8 206.0 4 Petter Bøhler (1.1.10-22.3.10) 1, Executive Vice President 445.3 123.0 46.0 105.8 547.5 3.0 % 20.11.2012 3 Hege Toft Karlsen (1.9.10-31.12.10) 1, Exec. Vice President 591.2 27.7 53.5 76.2 1,965.3 2,348 3.0-3.3 % 16.04.2019 3 Martin Danielsen, Executive Vice President 1,911.2 324.0 162.1 555.8 4,479.6 4,213 3.0-3.3 % 28.04.2019 3 Bjørn Asp, Executive Vice President 2,026.1 418.9 199.2 595.5 5,663.9 3,353 3.0-3.1 % 20.07.2033 3 Kim Rud-Petersen (15.3-31.12.10) 1, Executive Vice President 2,115.3 223.1 136.5 2,244 Lise Westly (1.3-31.12.10) 1, Executive Vice President 1,325.8 164.5 309.7 1,502 The Board of Directors 6 Inge K. Hansen, Chairman 439.0 1.5 5,711 Randi B. Sætershagen, Deputy Chairman 375.0 3.6 2,711 Trond V. Andersen 297.5 2.5 113.9 1,482 5.8 % 20.08.2014 Hans-Erik Andersson 280.0 2.3 1,482 Mari T. Skjærstad (28.6.10-31.12.10) 1 100.0 1.5 Tor Øwre 337.0 7.8 1,482 Gisele Marchand (28.6.10-31.12.10) 1 110.0 1.5 1,235 Karen Marie Hjelmeseter (1.1.10-28.6.10) 1 151.5 1.2 Hans Ellef Wettre (1.1.10-28.6.10) 1 135.0 Per Engebreth Askilsrud (1.1.10-28.6.10) 1, 11 157.5 1.0

138 gjensidige annual report 2010 19 salaries and remuneration (Cont.) Key management personell compensation 2010 NOK thousand Fixed salary/fee Variable salary Calculated value of total benefits other than cash Rights earned in the financial year according to defined benefit pension plan 9 Loans, advance payments, guarantees. outstanding amount Number of shares held Interest rate 7 Applicable conditions and installment plan Retirement conditions Gunnhild H. Andersen, employee 235.0 605 Kjetil Kristensen, employee 235.0 406 Gunnar Mjåtvedt, employee 280.0 799 Marianne Bø Engebretsen (1.1.10-28.6.10) 1, 11, employee 133.5 605 The Board of Directors, deputies 6 Per Andersen (28.6.10-31.12.10) 1, 10 2,711 Per Engebreth Askilsrud (28.6.10-31.12.10) 1, 11 347 Laila S. Dahlen (28.6.10-31.12.10) 1 3.5 1,482 Knud Peder Daugaard (28.6.10-31.12.10) 1 3.5 2,711 Ingun M. Leikvoll (28.6.10-31.12.10) 1 18.5 Sissel Johanne Monsvold 27.8 Wenche Teigland (28.6.10-31.12.10) 1 10.0 Valborg Lippestad (1.1.10-28.6.10) 1 23.0 John Ove Ottestad (1.1.10-28.6.10) 1 13.0 Harald Milli (1.1.10-24.3.10) 1 3.0 Per Gunnar Skorge (24.3.10-31.12.10) 1 3.0 Marianne Bø Engebretsen (28.6.10-31.12.10) 1, 11, employee Marianne Brinch van Meenen (28.6.10-31.12.10) 1, 10, employee 505 Ingvild Sollie Andersen (1.1.10-28.6.10) 1, employee 11.0 Knut Bertil Øygard (1.1.10-28.6.10) 1, employee 13.0 Control comittee 6 Marit Tønsberg (1.1.10-28.6.10) 1, Chairman 216.0 1.2 Sven Iver Steen (28.6.10-31.12.10) 1, 10, Chairman 1,482 Snorre Inge Roald 1.1.10-28.6.10) 1, Deputy Chairman 147.5 Tove Melgård (1.1.10-28.6.10) 1 136.0 3.0 Joar Kavli (1.1.10-28.6.10) 1, Deputy 7.5 5,094.5 3.5 % 19.09.2018 Hallvard Strømme (28.6.10-31.12.10) 1 1.5 Lieslotte Aune Lee (28.6.10-31.12.10) 1 6.5 Vigdis Myhre Næsseth (28.6.10-31.12.10) 1, Deputy 11.5 Supervisory board Kirsten Indgjerd Værdal (1.1.10-28.6.10) 1, 11, Chairman 126.0 0.4 Bjørn Iversen (28.6.10-31.12.10) 1, Chairman 23.0 Trond Bakke (1.1.10-28.6.10) 1, Deputy Chairman 107.5 Kirsten Indgjerd Værdal (28.6.10-31.12.10) 1, 11, Deputy Chairman In addition 43 representatives from the company/fire Mutuals/organisations/employees. 5 1 the stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 percent at age 67 according to time of earning. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 4 Age 60, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 5 Annual fee of nok three thousand five hundred, in addition to a per meeting fee of nok three thousand five hundred. There have been three ordinary meetings during 2010. 6 The fee includes a fee for subsidiaries. 7 The interest rate is 3.0 nominal, unless other is stated. 8 For employees only remuneration for the current position is stated. 9 Everyone in the Senior Group Management has pension plans, benefit based or contribution based. 10 The person concerned has not received any fees during 2010. 11 Fee includes all posisions held during 2010.

gjensidige annual report 2010 139 19 salaries and remuneration (Cont.) Key management personell compensation 2009 NOK thousand Fixed salary/fee Variable salary Calculated value of total benefits other than cash Rights earned in the financial year according to defined benefit pension plan 9 Loans, advance payments, guarantees. outstanding amount Applicable conditions and install- Interest rate 7 ment plan Retirement conditions The Senior Group Management Helge Leiro Baastad, Ceo 4,004.2 1,220.8 231.4 1,839.6 2 Bjørn Asp, Executive Vice President 2,014.4 10.5 200.9 562.5 5,704.8 2.6-2.7 % 20.07.2033 3 Petter Bøhler, Executive Vice President 2,019.3 314.6 190.0 962.6 821.6 2.6 % 20.11.2012 3 Trond Delbekk, Executive Vice President 2,241.2 434.7 207.9 813.1 3 Tor Magne Lønnum, Deputy Ceo 2,782.8 538.2 204.9 964.4 3 Jørgen Inge Ringdal, Executive Vice President 2,100.5 322.9 156.8 820.9 479.5 2.6 % 04.06.2019 2 Bjørn Walle, Executive Vice President 1,895.2 224.8 234.0 610.6 4 Erica Blakstad, Executive Vice President 1,866.1 294.8 191.2 1,388.4 3 Martin Danielsen (10.09.09-31.12.09) 1, Executive Vice President 634.4 151.3 54.0 272.8 4,406.0 2.6-2.9 % 28.04.2019 3 Board of Directors 6 Inge K. Hansen, Chairman 380.0 1.5 Randi B. Sætershagen, Deputy Chairman 384.8 8.7 3.2 % 19.02.2018 Hans Erik Andersson 250.0 4.3 Karen Marie Hjelmeseter 210.8 2.3 Hans Ellef Wettre 195.0 1.5 Tor Øwre 319.3 13.3 Cato Litangen (01.01.09-31.03.09) 1 65.0 4.5 Marianne Lie (01.01.09-31.03.09) 1 61.3 1.5 Trond V. Andersen (01.04.09-31.12.09) 1 177.5 1.7 141.2 5.3 % 20.08.2014 Per Engebreth Askilsrud (01.04.09-31.12.09) 1 222.8 2.3 Gunnar Mjåtvedt, employee 185.0 Gunnhild H. Andersen, employee 185.0 Kjetil Kristensen, employee 185.0 Marianne Bø Engebretsen, employee 185.0 perspektiv results The Board of Directors, deputies 6 Valborg Lippestad 23.0 Harald Milli 14.5 John Ove Ottestad 18.0 Trine Vekseth (01.01.09-31.03.09) 1 9.3 0.6 Sissel Johanne Monsvold (01.04.09-31.12.09) 1 13.5 Ingvild Sollie Andersen, employee 11.0 Christian Kristensen (01.01.09-31.03.09) 1, employee 2.8 Knut Bertil Øygard (01.04.09-31.12.09) 1 8.3 Control comittee 6 Marit Tønsberg, Chairman 115.2 0.6 Snorre Inge Roald, Deputy Chairman 68.7 3.7 Tove Melgård 80.5 4.0 Supervisoy board 5 Kirsten Indgjerd Værdal, Chairman 119.5 5.4 Trond Bakke, Deputy Chairman 39.5 0.6 In connection with the resignation for one member of the Senior Group Management, a severe payment of nok 2.2 million has been paid. In addition 43 representatives from the company/fire Mutuals/organisations/employees. 5 1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 percent at age 67 according to time of earning. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 4 Age 60, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 5 Annual fee of nok three thousand, in addition to a per meeting fee. There were two ordinary meetings during 2009. The fees have been of nok three thousand and three thousand five hundred respectively. 6 The fee includes a fee for subsidiaries. 7 The interest rate is 2.6 nominal, unless other is stated. 8 For employees only remuneration for the current position is stated. 9 Everyone in the Senior Group Management has pension plans, benefit based or contribution based.

140 gjensidige annual report 2010 20 Net INcoME from INvestMENts NOK million 2010 2009 Net income and gains/(losses) from investments in associates Net income from associates 488.9 263.3 Net gain from sale of associates (0.1) Total net income and gains/(losses) from investments in associates 488.7 263.3 Net income and gains/( losses) from property Owner-occupied properties Rental income from owner-occupied properties 14.2 16.7 Net gain/(loss) from sale of owner-occupied properties 55.0 2.4 Administration expenses related to owner-occupied properties (11.5) (13.3) Impairment owner-occupied properties (2.2) Total net income and gains/(losses) from owner-occupied properties 55.5 5.8 Investment properties Rental income from investment properties, excl. unrealised gain/(loss) 408.6 384.5 Net revaluation investment properties (1.0) (212.4) Net gain/(loss) from sale of investment properties 7.0 2.1 Administration expenses related to investment properties (80.0) (71.8) Total net income and gains/(losses) from investment properties 334.6 102.3 Total net income and gains/(losses) from property 390.1 108.2 Net income and gains/(losses) from financial assets at fair value through profit or loss, designated Derivatives Net interest income/(expenses) from derivatives (15.0) 32.0 Unrealised gain/(loss) from derivatives 140.7 509.0 Net realised gain/(loss) from derivatives (65.0) 740.2 Total net income and gains/(losses) from derivatives 60.7 1,281.2 Shares and similar interests Dividend income 89.2 5.7 Unrealised gain from shares and similar interests 110.6 471.2 Net realised gain/(loss) from sale of shares and similar interests 175.1 (106.7) Total net income and gains/(losses) from shares and similar interests 374.9 370.2 Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 432.0 601.6 Unrealised gain/(loss) from bonds and other fixed-income securities 78.6 72.3 Net realised gain/(loss) from bonds and other fixed-income securities 271.1 (355.8) Total net income and gains/(losses) from bonds and other fixed-income securities 781.6 318.1 Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 1,217.3 1,969.5 Net income and gains/(losses) from bonds held to maturity Net interest income from bonds held to maturity 773.1 849.7 Unrealised gain/(loss) from bonds held to maturity (11.8) (22.8) Net gain/(loss) from changes in exchange rates on bonds held to maturity (32.9) Total net income and gains/(losses) from bonds held to maturity 761.4 794.0 Net income and gains/(losses) from loans and receivables Net interest income/(expenses) from loans and receivables 236.9 77.5 Net gain/(loss) from loans and other receivables 19.7 17.1 Net gain/(loss) from changes in exchange rates on loans and other receivables (94.4) (100.3) Total net income and gains/(losses) from loans and other receivables 162.2 (5.7) Net income and gains/(losses) from financial liabilities measured at amortised cost Net gain/(loss) from changes in exchange rates of insurance related financial liabilities (0.2) 5.4 Total net income and gains/(losses) from financial liabilities measured at amortised cost (0.2) 5.4 Net other financial income/(expenses) 1 (119.2) (223.0) Discounting of claims provision classified as interest expense (130.2) (123.7) Change in discount rate claims provision (21.8) Total net income from investments 2,748.2 2,788.0

gjensidige annual report 2010 141 20 net income FroM investments (cont.) NOK million 2010 2009 Specifications Interest income and expenses from financial assets and liabilities not recognised at fair value through profit or loss Total interest income from financial assets not recognised at fair value through profit or loss 1,053.2 928.7 Total interest expense from financial liabilities not recognised at fair value through profit or loss (43.2) (1.5) Other financially related income and expenses not recognised in net income from investments Commission arising from the investment of assets on behalf of life insurance 22.4 11.2 1 Net other financial income/(expenses) includes financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs. 21 contingent liabilities NOK million 2010 2009 Guarantees and committed capital Gross guarantees 0.6 0.6 Committed capital, not paid 705.8 946.0 As part of its ongoing financial management, the Company has undertaken to invest up to nok 705.8 million in various private equity and real estate investments, over and above amounts recognised in the balance sheet. Investments in private equity and real estate funds totalled nok 1,303.6 million at the end of the year. There are contractual commitments regarding developing of investment properties amounting to nok 96.0 million, and a commitment to invest nok 45.0 million in a residential development project. The latter commitment will fall due during the period from 2011 to 2013, depending on the project s progress. perspektiv results The timing of the outflow of capital is dependent on when the funds are making capital calls from their investors. Average remaining operating time for the funds is slightly above eight years and ten years in average including option of extention. Gjensidige Forsikring is responsible externally for any insurance claim arising from the cooperating Fire Mutuals operations. 22 related party transactions OVERVIEW of related parties Gjensidige Forsikring asa is the Group s parent company. As at 31 December 2010 the following companies are regarded related parties. Registered office Interest held Ultimate parent company Gjensigestiftelsen holds 61,74 per cent of the shares in Gjensidige Forsikring asa Oslo, Norway Subsidiaries Fair Forsikring A/S Copenhagen, Denmark 100.0 % Gjensidiges Arbejdsskadeforsikring A/S Copenhagen, Denmark 100.0 % Gjensidige Baltic Riga, Latvia 100.0 % Gjensidige Bank Holding as Førde, Norway 100.0 % Gjensidige Norge as Oslo, Norway 100.0 % Gjensidige Pensjon og Sparing Holding as Oslo, Norway 100.0 % Glitne Invest as Oslo, Norway 100.0 % Lokal Forsikring as Oslo, Norway 100.0 % Nykredit Forsikring A/S Copenhagen, Denmark 100.0 % Oslo Areal as Oslo, Norway 100.0 % Samtrygd Eigedom as Førde, Norway 100.0 % Strandtorget Drift as Oslo, Norway 100.0 % Strandtorget Eiendom as Oslo, Norway 100.0 % Tennant Holding AB Stockholm, Sweden 100.0 % Associates Bilskadeinstituttet as Oslo, Norway 29.5 % Sparebank1 sr-bank 1 Stavanger, Norway 10.8 % Storebrand asa Oslo, Norway 24.3 % Vervet as Tromsø, Norway 25.0 % 1 In addition Gjensidige owns bonds in SpareBank1 sr-bank amounting to nok 5.0 million.

142 gjensidige annual report 2010 22 related party transactions (cont.) Registered office Interest held Other related parties Fire Mutuals All over the country, Norway Gjensidige Pensjonskasse Oslo, Norway 94.7 % 1 In addition Gjensidige owns bonds in SpareBank1 sr-bank amounting to nok 5.0 million. Percentage of votes held is the same as percentage of interest held. TRANsactioNS with related parties Income statement The table below shows transactions with related parties recognised in the income statement. 2010 2009 NOK million Income Expense Income Expense Gross premiums written Fair Forsikring A/S including subsidiaries 68.5 Gjensidiges Arbejdsskadeforsikring A/S 13.1 Gjensidige Baltic 8.4 10.8 Gjensidige Pensjonsforsikring as (owned by Gjensidige Pensjon og Sparing Holding as) 0.2 0.2 Nykredit Forsikring A/S 782.2 Tennant Försäkringsaktiebolag AB (owned by Tennant Holding AB) 8.3 10.7 Change in gross provision for unearned premiums Fair Forsikring A/S including subsidiaries 0.1 Gjensidige Baltic 0.3 Gross paid claims Fair Forsikring A/S 96.7 Gjensidige Baltic 0.7 Nykredit Forsikring A/S 374.5 Tennant Forsikring nuf (branch of Tennant Försäkringsaktiebolag AB) 24.3 Change in gross provision for claims Fair Forsikring A/S 76.2 Nykredit Forsikring A/S 294.6 Tennant Forsikring nuf (filial av Tennant Försäkringsaktiebolag AB) 1.6 22.3 Commissions Gjensidige Bank asa (owned by Gjensidige Bank Holding as) 0.9 2.5 Administration expenses Fair Forsikring A/S including subsidiaries 1.2 Gjensidige Bank asa (owned by Gjensidige Bank Holding as) 21.7 9.3 Gjensidige Investeringsrådgivning asa (owned by Gjensidige Pensjon og Sparing Holding AS) 8.3 22.5 Gjensidige Pensjon og Sparing Holding as 10.6 11.8 Gjensidige Pensjonsforsikring as (owned by Gjensidige Pensjon og Sparing Holding as) 39.5 44.4 Glitne Invest as 0.1 0.1 Hjelp24 as (owned by Glitne Invest as) 4.8 5.4 KommuneForsikring nuf (branch of KommuneForsikring as, owned by Fair Forsikring A/S) 23.1 Nykredit Forsikring A/S 107.5 Oslo Areal as 0.2 4.2 0.1 4.1 Tennant Forsikring nuf (branch of Tennant Försäkringsaktiebolag AB) 5.0 4.9 Tennant Holding AB 6.1 1.1 Interest expenses Fair Forsikring A/S 17.7 Total 898.5 811.0 314.2 127.2 Gjensidigestiftelsen has covered part of the expenses related to the stock exchange listing of Gjensidige Forsikring asa. Expenses related to the conversion of Gjensidige Forsikring BA to a public limited company are evenly divided between Gjensidigestiftelsen and Gjensidige Forsikring. The expenses are charged Gjensidige Forsikring and invoiced Gjensidigestiftelsen. At year end the intercompany account was nok 34.4 million. Purchase and sale of assets As per 1 January 2010, Gjensidige Forsikring ASA has acquired all of the assets and liabilities of Fair Forsikring A/S, excluding shares in the subsidiaries Fair Invest A/S and KommuneForsikring A/S, and all of the assets and liabilities from KommuneForsikring A/S. The insurance business in Fair Forsikring A/S and KommuneForsikring A/S is liquidated, and as a result of the transaction

gjensidige annual report 2010 143 22 related party transactions (cont.) transferred to Gjensidige Forsikring ASA s branch in Denmark. The value of the transaction amounts to NOK 1.6 billion. As per 1 October 2010, the Danish branch of Gjensidige Forsikring acquired the commercial and change-of-ownership portfolios from Nykredit Forsikring A/S (Nykredit Forsikring). After this transaction, only the private insurance portfolio remains in Nykredit Forsikring. The transaction was conducted at fair value and amounts to DKK 545.0 million. Group contributions and dividends The table below shows a summary of contributions/dividends from/to subsidiaries. 2010 2009 NOK million Received Given Received Given Group contributions Gjensidige Baltic 21.1 Gjensidige Bank asa (owned by Gjensidige Bank Holding as) 74.0 Gjensidige Pensjonsforsikring as (owned by Gjensidige Pensjon og Sparing Holding as) 26.8 75.2 Gjensidige Investeringsrådgivning asa (owned by Gjensidige Pensjon og Sparing Holding as) 14.6 44.9 Glitne Invest as 22.3 18.1 Gjensidige Norge as 0.1 Oslo Areal as 101.1 73.2 Strandtorget Eiendom as 0.1 Tennant Försäkringsaktiebolag AB 1.0 41.6 Dividends Fair Forsikring A/S including subsidiaries 176.3 Oslo Areal as 104.9 Gjensidige Norge 6.0 Gjensidige nor Forsikring Eiendom as (liquidation dividend) 0.2 SpareBank 1 sr-bank 36.2 perspektiv results Total group contributions and dividends 292.7 41.4 309.5 194.2 intercompany The table below shows a summary of receivables/liabilities from/to subsidiaries, associates and related parties. 1 Cooperating companies are defined as companies with which Gjensidige Forsirking has entered into a long-term strategic alliance 2010 2009 NOK million Receivables Liabilities Receivables Liabilities Within the Group Fair Forsikring A/S including subsidiaries 3.5 12.7 Gjensidiges Arbejdsskadeforsikring A/S 13.0 Gjensidige Baltic 3.8 Gjensidige Norge as 0.1 Gjensidige Bank asa (owned by Gjensidige Bank Holding as) 0.8 5.3 74.0 Gjensidige Pensjon og Sparing Holding as 1.2 (0.2) Gjensidige Pensjonsforsikring as (owned by Gjensidige Pensjon og Sparing Holding as) 22.8 10.0 75.2 Gjensidige Investeringsrådgivning asa (owned by Gjensidige Pensjon og Sparing Holding as) 14.8 9.5 44.9 Gjensidigestiftelsen 34.4 Glitne Invest as 22.2 17.9 Hjelp24 as (owned by Glitne Invest as) 1.4 1.6 KommuneForsikring nuf (branch of KommuneForsikring as, owned by Fair Forsikring A/S) 7.4 Nykredit Forsikring A/S 26.2 Oslo Areal as 80.0 73.2 Tennant Holding AB 11.2 38.7 Tennant Försäkringsaktiebolag AB (owned by Tennant Holding AB) 13.0 41.2 2.8 Tennant Assurance AB (owned by Tennant Försäkringsaktiebolag AB) 0.9 Tennant Forsikring nuf (branch of Tennant Försäkringsaktiebolag AB) 1.4 1.6 15.9 Samtrygd Eigedom as 1.7 Total intercompany balances within the Group 190.7 57.0 222.7 213.7 Cooperating companies 1 and other related parties Fire Mutuals 190.2 165.2 Total intercompany 190.7 247.3 222.7 378.9 Guarantees Gjensidige Forsikring is responsible externally for any insurance claim arising from the cooperating mutual fire insurers fire insurance business, see note 21.

144 gjensidige annual report 2010 23 events after the BalaNce sheet date No significant events have occurred after the end of 2010. 24 capital ratio NOK million 2010 2009 Equity 23,137.8 21,968.2 Administration provision 1,114.1 1,054.1 Security provision (2,398.2) (2,467.7) Dividend (2,350.0) (1,650.0) Tax effects 821.4 829.2 Equity Ngaap 20,325.0 19,733.9 Hybrid capital in associates, proportion 426.3 417.3 Effect of administration prov., guarantee scheme prov. and Natural perils fund (4,307.0) (3,966.6) Goodwill (2,580.7) (1,507.5) Deferred tax assets (199.4) Other intangible assets (1,349.5) (847.1) Investment properties, unrealised gains, proportion (268.1) (278.1) Reinsurance provision, minimum requirement (6.4) (5.6) Core capital 12,040.2 13,546.3 Index bonds in associates, proportion 8.3 11.4 Subordinated loans in associates, proportion 1,670.7 1,702.2 45 % of investment properties, unrealised gains, proportion 120.7 125.2 Additional capital 1,799.7 1,838.8 Primary capital 13,839.8 15,385.1 Primary capital in other financial institutions (108.6) (108.6) Net primary capital (A) 13,731.2 15,276.5 Assets with 0 % risk weight 6,459.5 6,038.6 Assets with 10 % risk weight 551.4 931.6 Assets with 20 % risk weight 32,445.8 27,843.0 Assets with 35 % risk weight 11,011.7 8,285.4 Assets with 50 % risk weight 2,097.9 1,498.3 Assets with 100 % risk weight 26,131.2 27,614.0 Assets with 150 % risk weight 743.1 100.3 Other non-weighted assets Goodwill 2,580.7 1,507.5 Deferred tax assets 199.4 Other intangible assets 1,349.5 847.1 Derivatives 536.6 203.2 Total assets 84,106.8 74,868.9 Assets with 0 % risk weight 0.0 0.0 Assets with 10 % risk weight 55.1 93.2 Assets with 20 % risk weight 6,489.2 5,568.6 Assets with 35 % risk weight 3,854.1 2,899.9 Assets with 50 % risk weight 1,049.0 749.1 Assets with 100 % risk weight 26,131.2 27,614.0 Assets with 150 % risk weight 1,114.6 150.5 Net basis of calculation for institutions reporting in accordance with Basel ii and which are not distributed according to risk weight 46,872.5 44,038.0 Total risk weighted assets 85,565.6 81,113.3 Weighted reinvestment cost derivatives 123.8 33.2 Primary capital in other financial institutions (108.6) (108.6) Loss provisions (116.5) (14.5) Risk weighted calculation base (B) 85,464.3 81,023.4 Capital ratio (A/B) 16.1 % 18.9 % FSAN minimum requirement 8.0 % 8.0 %

gjensidige annual report 2010 145 25 Solvency margin NOK million 2010 2009 Net primary capital 13,731.2 15,276.5 Proportion of security provision 1,079.3 1,207.5 Proportion of Natural perils fund (up to 25 % of the Natural perils fund is included) 660.7 597.5 Solvency margin capital 15,471.1 17,081.4 Solvency margin minimum requirement 6,097.6 5,740.0 In excess of requirement 9,373.5 11,341.4 Solvency margin capital in per cent of requirement 253.7 % 297.6 % 26 restricted funds NOK million 2010 2009 Restricted bank deposits Source-deductible tax accounts 65.2 74.7 Securities placed as security for insurance operations 13.9 14.8 Deposits placed as security for insurance operations 8.3 Total 87.5 89.5 perspektiv results 27 shareholders The 20 largest shareholders as of 31 December 2010. Investor Number of shares Owner share in % Gjensidigestiftelsen 308,685,000 61.74 % Folketrygdfondet 12,225,000 2.45 % Credit Suisse Securities Nominee 9,730,483 1.95 % Goldman Sachs Int. - Equity 8,655,305 1.73 % Skagen Global 8,337,000 1.67 % State Street Bank And Trust Co. Nominee 8,022,600 1.60 % Goldman Sachs & Co - Equity Nominee 7,513,210 1.50 % Skagen Kon-Tiki 6,947,000 1.39 % Deutsche Bank ag London Nominee 6,000,000 1.20 % State Street Bank And Trust Co. Nominee 5,675,591 1.14 % Morgan Stanley & Co Internat. plc Nominee 5,045,750 1.01 % Skagen Vekst 3,300,203 0.66 % Skagen Global ii 3,206,328 0.64 % Morgan Stanley & Co Inc. New York 2,611,286 0.52 % Rasmussengruppen as 2,540,000 0.51 % DnB nor Bank asa 2,460,837 0.49 % Barclays Bank plc 2,400,000 0.48 % Vital Forsikring asa 1,998,200 0.40 % Odin Norden 1,912,800 0.38 % Odin Norge 1,882,930 0.38 % Number of shares 20 largest shareholders 409,149,523 81.83 % Total number of shares 500,000,000 100.00 % The shareholder list is based on the Vps shareholder registry as of 31 December 2010. A shareholder list showing the owners behind nominee accounts can be found on page 46.

146 gjensidige annual report 2010 28 share-based payment In connection with the stock-exchange listing of Gjensidige Forsikring asa on 10 December 2010 all employees in the Group except for the employees in Gjensidige Baltic were given the opportunity to buy shares in the company. Eligible employees were permanent employees as at 13 December 2010. There were no requirements with regards to position percentage, whether or not the employees had been at work, reported sick or on leaves of absence etc. The offer was also given to employees who received employment clarification money. There are no other terms attached to the stock purchase offering. For every tenth share owned continuously until 12 December 2011 the employees will receive 1.5 bonus shares. If the shares are owned continuously until 10 December 2012 a further 1.5 bonus shares will be awarded for every tenth share. As at 31 December 2010 the participants have invested 55.2 million in the stock purchase offering. The fair value at the moment of allocation was measured based on the price in the customer tranche versus the price in the employee tranches. The value of the bonus shares was discounted using a discount factor after respectively one and two years. The amount is recognised as wage cost in the income statement and as other paid in equity in the statement of changes in equity. Personnel costs NOK million Note 2010 Stock purchase offering for employees allocated in 2010 18 7.5 29 earnings per share Restated 2010 2009 Profit / (loss) for the year (nok million) 2,950.4 2,304.8 Weighted average number of shares 1 499,996,261 500,000,000 Earnings per share (nok) 5.90 4.61 1 Holdings of own shares are not included in calculations of the number of shares.

gjensidige annual report 2010 147 30 acquisition of NYkredit On 8 March 2010, Gjensidige signed a contract with the Nykredit Group (Nykredit) relating to the purchase of 100 per cent of the shares in the Danish insurance company, Nykredit Forsikring A/S (Nykredit Forsikring), for DKK 2.5 billion. The voting share is equal to the ownership share. All terms and conditions related to the acquisition were clarified and the payment was transferred by the end of April, so the acquisition date was set at 1 May 2010. Nykredit Forsikring is recognised in the consolidated accounts of Gjensidige Forsikring as from that date. In connection with the acquisition, Gjensidige is entering into a longterm strategic collaboration with Nykredit. As part of this collaboration, Nykredit shall distribute general insurance for Gjensidige. Nykredit is one of Denmark s largest financial groups, with activities in banking, insurance, pensions and estate agency business. The Group has extensive distribution, including 70 advisory offices and two estate agency chains with a total of 310 offices. The acquisition is a result of the Group s intention to increase its market share in Denmark. As a result of the acquisition, Gjensidige s market share in general insurance in Denmark will increase from about three to about six per cent. The acquired business has 230,000 customers and gross earned premiums in excess of DKK 1.4 billion, and in 2009 it reported a profit after tax of DKK 245 million. Through Nykredit Forsikring, Gjensidige has added 320 employees to its staff. Private insurance is of greatest size in Nykredit Forsikring: about two-thirds of the total premium volume. The accounting of the acquisition was based on the acquisition method. The analysis of acquired assets and liabilities is presented in the table below and is considered to be temporary. The value in addition to the identifiable acquired assets and assumed liabilities is recognised as goodwill in the consolidated financial statement. Excess value is identified for customer relationships, distribution agreements, databases for claims history and associated companies. Provisions were made for deferred tax liability for excess value with the exception of excess value in associated companies and goodwill. Goodwill consists of expected synergies from the merging of the Private and Commercial business areas and optimisation of the reinsurance cover for the Group as a whole. Gross premiums written for Nykredit Forsikring for the period 1 January 2010 to 31 December 2010 came to DKK 1,309.6 million, whereas the profit before tax expense in this period was DKK 533.0 million. A profit before tax expenses of nok 644.9 million from Nykredit Forsikring is included in the consolidated accounts after the acquisition date. Gross premiums written in the same period amounted to nok 683.7 million. Due to adaption to the Group s accounting policies related to claims provisions Gjensidige has adjusted the temporary figures at the acquisition date as presented in note 11 in the interim report for the second quarter with retrospective effect. The consequense of the adjustment is that the claims provision has been increased by DKK 35 million, deferred tax liabilities have been reduced by DKK 8.8 million and goodwill has been increased by DKK 26.2 million. perspektiv results Fair value of each major class of transaction price Carrying amount Fair value Fair value at the dkk million before the transaction adjustment acquisition date Intangible assets 593.0 593.0 Financial assets 2,856.3 2,856.3 Associated companies 21.6 8.0 29.6 Total assets 2,877.9 601.0 3,478.9 Liabilities related to direct insurance 1,830.7 1,830.7 Deferred tax liabilities 28.7 148.3 176.9 Other liabilities 137.9 137.9 Total liabilities 1,997.2 148.3 2,145.5 Net identified assets and liabilities 880.7 452.8 1,333.5 Goodwill 1,212.2 Transaction price 2,545.7 Equity as at 1 May 2010 came to DKK 880.7 million, compared to an equity of DKK 1,482.3 million as at 31 Desember 2009. Acquired goodwill is not considered to be tax deductible.

148 gjensidige AnnUAL REPORT 2010 INCOME statement GJensiDige FOrsikring asa NOK million Notes 1.1.-31.12.2010 1.1.-31.12.2009 Premiums Gross premiums written 4 16,313.1 13,153.9 Ceded reinsurance premiums (438.7) (368.7) Premiums written, net of reinsurance 15,874.5 12,785.1 Change in gross provision for unearned premiums (218.7) (102.5) Change in provision for unearned premiums, reinsurerers' share 18.9 1.8 Total earned premiums, net of reinsurance 15,674.7 12,684.5 Allocated return on investments transferred from the non-technical accounts 759.7 729.6 General insurance claims Gross paid claims 4 (10,796.8) (9,070.4) Paid claims, reinsurers' share 246.3 130.7 Change in gross provision for claims 4 (1,796.6) (616.6) Change in provision for claims, reinsurers' share 201.1 (101.8) Total claims incurred, net of reinsurance (12,146.1) (9,658.1) Premium discounts and other profit agreements (18.6) 3.0 Insurance-related operating expenses Insurance-related administration expenses incl. commissions for received reinsurance and sales expenses 4, 18 (2,897.7) (2,425.5) Received commissions for ceded reinsurance and profit share 8.2 7.2 Total insurance-related operating expenses (2,889.5) (2,418.4) Profit/(loss) of technical account before security provisions 1,380.0 1,340.6 Change in security provisions etc. Change in provision for insufficient premium level (0.1) Change in security provision 69.3 (5.5) Total change in security provisions etc. 69.2 (5.5) Profit/(loss) of technical account general insurance 1,449.3 1,335.1

gjensidige AnnUAL REPORT 2010 149 NOK million Notes 1.1.-31.12.2010 1.1.-31.12.2009 Net income from investments Income from investments in subsidiaries and associates 292.7 309.5 Impairment losses investments in subsidiaries and associates (152.3) (3.7) Interest income and dividend etc. from financial assets 1,339.2 1,260.5 Net operating income from property 67.5 70.3 Changes in fair value on investments 362.7 808.2 Realised gain and loss on investments 421.5 564.3 Administration expenses related to investments, including interest expenses 20 (169.1) (185.6) Total net income from investments 2,162.2 2,823.5 Allocated return on investments transferred to the technical account (759.7) (729.6) Other income 11.7 12.8 Other expenses 18 (32.6) (12.1) Profit/(loss) of non-technical account 1,381.7 2,094.7 Profit/(loss) before tax expense 2,831.0 3,429.8 perspective results Tax expense 17 (240.7) (486.2) PrOFit/(loss) before COMponents OF other COMprehensive income 2,590.2 2,943.6 Components of other comprehensive income Actuarial gains and losses on defined benefit plans - employee benefits (122.9) 434.6 Exchange differences from foreign operations 4.5 0.4 Tax on components of other comprehensive income 34.6 (121.7) Total comprehensive income 2,506.5 3,257.0

150 gjensidige AnnUAL REPORT 2010 STATEMent OF FinanCial POsitiON NOK million Notes 31.12.2010 31.12.2009 assets Intangible assets Goodwill 1,035.6 152.0 Other intangible assets 659.1 235.2 Total intangible assets 5 1,694.7 387.1 Investments Buildings and other real estate Investment properties 8 1,102.5 1,163.5 Owner-occupied property 7 112.0 182.9 Subsidiaries and associates Shares in subsidiaries 6 14,471.5 10,565.1 Shares in associates 6 3,435.2 3,434.8 Financial assets measured at amortised cost Bonds held to maturity 9 13,600.6 14,856.5 Loans 9, 11 4,168.4 1,693.0 Financial assets measured at fair value Shares and similar interests 9, 13 3,912.2 6,281.6 Bonds and other fixed-income securities 9 8,463.7 8,448.7 Financial derivatives 9, 10 434.5 166.9 Reinsurance deposits 344.6 0.6 Total investments 50,045.1 46,793.6 Reinsurers' share of insurance-related liabilities in general insurance, gross Reinsurers' share of provision for unearned premiums, gross 14 22.2 0.5 Reinsurers' share of claims provision, gross 14 412.8 154.4 Total reinsurers' share of gross insurance-related liabilities in general insurance, gross 435.0 154.9 Receivables Receivables related to direct operations 9 3,336.3 2,924.3 Receivables related to reinsurance 9 43.5 51.9 Receivables within the group 9, 22 190.7 222.7 Other receivables 9, 11 123.8 188.8 Total receivables 3,694.4 3,387.7 Other assets Plant and equipment 7 289.8 243.9 Cash and cash equivalents 9, 12, 26 775.5 1,143.9 Deferred tax assets 17 26.4 16.4 Total other assets 1,091.7 1,404.1 Prepaid expenses and earned, not received income Other prepaid expenses and earned, not received income 9 11.5 7.8 Total prepaid expenses and earned, not received income 11.5 7.8 TOtal assets 56,972.4 52,135.1

gjensidige AnnUAL REPORT 2010 151 Restated 1 NOK million Notes 31.12.2010 31.12.2009 EQuity and liabilities Share capital 1,000.0 1,000.0 Own shares (0.1) Premium reserve 1,430.0 1,430.0 Other paid in equity 6.7 Total paid in equity 2,436.6 2,430.0 Retained equity Funds etc. Fund for unrealised gains 150.7 200.3 Administration provision 1,114.1 1,054.1 Natural perils fund provision 2,615.7 2,418.2 Guarantee scheme provision 535.6 494.3 Other retained earnings 13,295.8 13,362.5 Total retained equity 17,712.0 17,529.3 perspective results Total equity 20,148.6 19,959.3 Insurance-related liabilities in general insurance, gross Provision for unearned premiums, gross 4, 14 6,406.7 5,620.2 Claims provision, gross 4, 14 22,971.8 19,161.2 Provision for premium discounts and other profit agreements 14 82.0 41.6 Security provision 4, 14 2,398.4 2,467.7 Total insurance-related liabilities in general insurance, gross 31,858.9 27,290.8 Provision for liabilities Pension liabilities 15 662.3 656.3 Current tax 17 380.0 881.5 Deferred tax liabilites 16 62.3 69.1 Other provisions for liabilities 1,104.6 1,606.8 Liabilities Liabilities related to direct insurance 9 212.0 249.0 Liabilities related to reinsurance 9 98.1 51.9 Financial derivatives 9, 10 105.0 17.7 Accrued dividend 2,350.0 1,724.8 Other liabilities 9, 16 907.4 892.5 Liabilities to subsidiaries and associates 9, 22 57.0 213.7 Total liabilities 3,729.6 3,149.6 Accrued expenses and deferred income Other accrued expenses and deferred income 9, 16 130.6 128.6 Total accrued expenses and deferred income 130.6 128.6 TOtal EQuity and liabilities 56,972.4 52,135.1 1 The company is converted from limited liability mutual company (BA) to public limited company (ASA). In that connection the comparable figures under equity are changed. There is no change in total equity. Restatement of the comparable figures are presented in consolidated statement of changes in equity.

152 gjensidige AnnUAL REPORT 2010 STATEMent OF Changes in EQuity GJensiDige FOrsikring asa Class I capital Class ii capital Equity Equali- Total Total certificate sation Other class I Retained Other class ii Total NOK million capital fund equity capital earnings equity capital equity Equity as at 31.12.2008 restated 3,860.0 123.3 604.6 4,587.9 11,951.1 1,813.5 13,764.5 18,352.4 Ownership fraction 25 % 75 % Other Exchange Actuarial Other Share Own Premium paid-in differ- gains/losses earned Total NOK million capital shares reserve equity ences on pension equity equity Conversion from ba to asa Reclassification from equity certificate capital to share capital, premium reserve and other earned equity 1 1,000.0 1,430.0 1,430.0 3,860.0 Other reclassifications (2,420.7) 16,913.0 14,492.3 Equity as at 31.12.2008 restated 1,000.0 1,430.0 (2,420.7) 18,343.0 18,352.3 1 As at 30 September 2009 the equity certificate capital was reduced to NOK 1,000.0 million and equally transferred to premium reserve and equalisation fund. In connection with conversion from limited liability mutual company (BA) to public limited liability company (ASA) the equity certificate capital is converted to share capital. 1.1.-31.12.2009 Profit/(loss) before components of other comprehensive income 2,943.6 2,943.6 Components of other comprehensive income Exchange differences 0.4 0.4 Actuarial gains and losses on pension 434.6 434.6 Tax on other comprehensive income (121.7) (121.7) Total components of other comprehensive income 0.4 434.6 (121.7) 313.3 Total comprehensive income 0.4 434.6 2,821.9 3,257.0 Accrued dividend (1,650.0) (1,650.0) Equity as at 31.12.2009 1,000.0 1,430.0 0.4 (1,986.1) 19,515.0 19,959.3 1.1.-31.12.2010 Profit/(loss) before components of other comprehensive income 2,590.2 2,590.2 Components of other comprehensive income Exchange differences 4.5 4.5 Actuarial gains and losses on pension (122.9) (122.9) Tax on other comprehensive income 34.6 34.6 Total components of other comprehensive income 4.5 (122.9) 34.6 (83.8) Total comprehensive income 4.5 (122.9) 2,624.9 2,506.5 Own shares (0.1) (3.1) (3.1) Accrued dividend (2,350.0) (2,350.0) Increase in natural perils fund throuch purchase of portfolio 16.0 16.0 Equity-settled share-based payment transactions 6.7 6.7 Tax on items recognised directly in equity 13.2 13.2 Equity as at 31.12.2010 1,000.0 (0.1) 1,430.0 6.7 4.9 (2,108.9) 19,816.0 20,148.7

gjensidige AnnUAL REPORT 2010 153 Cash FLOW statement GJensiDige FOrsikring asa NOK million 1.1.-31.12.2010 1.1.-31.12.2009 Cash flow from operating activities Premiums paid, net of reinsurance 15,825.4 12,539.0 Claims paid, net of reinsurance (11,333.7) (8,986.2) Operating expenses paid, including commissions (2,655.4) (1,907.2) Net receipts/payments on lending and borrowing (2,281.7) 56.9 Net receipts/payments from investments Shares and other equity participations (577.1) (547.2) Bonds and other fixed-income securities 5,408.0 (173.9) Financial derivatives and other financial instruments 411.5 (586.9) Investment properties 65.7 32.1 Net group contribution and liquidation dividend 50.3 890.5 Interest and other financial income 193.0 688.3 Net receipts/payments - property activities 40.0 16.7 Payments of tax (716.9) (298.1) perspective results Net cash flow from operating activities 4,429.1 1,724.1 Cash flow from investing activities Payments on purchase of subsidiaries and associates (2,670.1) (866.4) Payments on purchase of portfolio (131.9) (135.0) Net receipts/payments on owner-occupied property 121.1 Net receipts/payments on sale/purchase of plant and equipment (147.9) (95.6) Net cash flow from investing activities (2,828.9) (1,097.0) Cash flow from financing activities Dividend paid (1,677.6) (6.8) Net receipts/payments - equity transactions in subsidiaries (587.7) (500.3) Net cash flow from financing activities (2,265.3) (507.1) Net cash flow for the period (665.0) 120.0 Cash and cash equivalents at the beginning of the period 1,143.9 939.6 Merged, added and disposed companies 296.6 84.3 Adjusted holdings at the beginning of the period 1,440.5 1,023.9 Cash and cash equivalents at the end of the period 775.5 1,143.9 Net movements in cash and cash equivalents (665.0) 120.0

154 gjensidige AnnUAL REPORT 2010 ACCOunting POliCies REPOrting entity Gjensidige Forsikring ASA is a publicly listed company domiciled in Norway. The company s head office is located at Drammensveien 288, Oslo, Norway. The activities of the company consist of general insurance. The company does business in Norway, in Sweden from 1 October 2009 and in Denmark from 1 January 2010. Gjensidigestiftelsen has controlling interest of Gjensidige Forsikring ASA and is thus obligated to prepare consolidated financial statements. The consolidated financial statements can be obtained by contacting Gjensidigestiftelsen at Drammensveien 288, Oslo, Norway. The accounting policies applied in the financial statements are described below. BASIS OF preparation Statement of compliance The financial statements have been prepared in accordance with the Norwegian Accounting Act and Norwegian Financial Reporting Regulations for Insurance Companies (FOR 1998-12-16 nr 1241). The Norwegian Financial Reporting Regulations for Insurance Companies is to a great extent based on IFRSs endorsed by EU, and interpretations. Changes in accounting policies There are no changes in accounting policies in 2010. The IFRSs and interpretations that have been issued up until 17 March 2011, not yet mandatory as at 31 December 2010; i.e. IFRS 9 and IFRIC 19, amendments to IAS 32, IFRIC 14, revised IAS 24, as well as improvements to IFRSs are assumed, based on assessments made so far, not to have material impact on reported figures. Basis of measurement The financial statements have been prepared based on the historical cost principle with the following exceptions derivatives are measured at fair value financial instruments at fair value through profit or loss are measured at fair value financial assets available for sale are measured at fair value investment properties are measured at fair value Functional and presentation currency The financial statements are presented in NOK, which is Gjensidige Forsikring s functional currency. All financial information is presented in NOK, unless otherwise stated. Due to rounding differences, figures and percentages may not add up to the total. SEGMent reporting According to IFRS 8, the operating segments are determined based on the Group s internal organisational management structure and the internal financial reporting structure to the chief operating decision maker. In Gjensidige Insurance Group the Senior Group Management is responsible for evaluating and following up the performance of the segments and is considered the chief operating decision maker within the meaning of IFRS 8. Gjensidige reports on two operating segments, which are independently managed by managers responsible for the respective segments depending on the products and services offered, distribution and settlement channels, brands and customer profiles. Identification of the segments is based on the existence of segment managers who report directly to the Senior Group Management/CEO and who are responsible for the performance of the segment under their charge. Based on this Gjensidige reports the following operating segments general insurance Private Norway general insurance Commercial Norway The recognition and measurement principles for Gjensidige s segment reporting are based on the IFRS principles adopted in the consolidated financial statements. Inter-segment pricing is determined on arm s length distance. Subsidiaries and associated COMpanies Subsidiaries and associated companies are recognised using the cost method. Cash FLOW statement Cash flows from operating activities are presented according to the direct method, which gives information about material classes and payments. RECOgnitiON OF revenue and EXpenses Premiums Insurance premiums are recognised over the term of the policy. Gross premiums written include all amounts the company has received or is owed for insurance contracts where the insurance period starts before the end of the accounting period. At the end of the period provisions are recorded, and premiums written that relate to subsequent periods are adjusted for in Change in gross provision for unearned premiums in the income statement. Ceded reinsurance premiums reduce gross premiums written, and are adjusted for according to the insurance period. Premiums for inward reinsurance are classified as gross premiums written, and are earned according to the insurance period. Allocated return on investments The allocated return on investments is calculated based on the average of the technical provisions throughout the year. The average yield on government bonds with three years remaining until maturity is used for the calculation. The Financial Supervisory Authority of Norway has calculated the average technical yield for 2010 and 2009 to be 2.4 per cent and 4.7 per cent, respectively. The allocated return on investments is transferred from the non-technical account to the technical account. Claims incurred in general insurance Claims incurred consist of gross paid claims less reinsurers share, in addition to a change in gross provision for claims, also less reinsurers share. Direct and indirect claims processing costs are included in claims incurred. The claims incurred contain run-off gains/losses based on previous years claims provisions.

gjensidige AnnUAL REPORT 2010 155 Insurance-related operating expenses Insurance-related operating expenses consist of insurance-related administration expenses including commissions for received reinsurance and sales expenses, less received commissions for ceded reinsurance and profit share. Net income from investments Financial income consist of interest income on financial investments, dividend received, realised gains related to financial assets, change in fair value of financial assets at fair value through profit or loss, and gains on financial derivatives. Interest income is recognised in profit or loss using the effective interest method. Financial expenses consist of interest expenses on loans, realised losses related to financial assets, change in fair value of financial assets at fair value through profit or loss, recognised impairment on financial assets and recognised loss on financial derivatives. All expenses related to loans are recognised in profit or loss using the effective interest method. FOreign CurrenCY Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies at exchange rates at the date of the transaction. losses. Cost includes expenditures that are directly attributable to the acquisition of the item. In cases where equipment or significant items have different useful lives, they are accounted for as separate components. Owner-occupied property is defined as property that is used by Gjensidige for conducting its business. If the properties are used both for the company s own use and as investment properties, classification of the properties is based on the actual use of the properties. Subsequent costs Subsequent costs are recognised in the asset s carrying amount when it is probable that the future economic benefits associated with the asset will flow to the Group, and the cost of the asset can be measured reliably. If the subsequent cost is a replacement cost for part of an item of owner-occupied property, plant and equipment, the cost is capitalized and the carrying amount of what has been replaced is derecognised. Repairs and maintenances are recognised in profit or loss in the period in which they are incurred. Gjensidige may engage in refurbishment, major upgrades or new property projects. The costs for these are recognised using the same principles as for an acquired asset. perspective results At the reporting date monetary items are retranslated to the functional currency at exchange rates at that date. Non-monetary items denominated in foreign currencies that are measured at historical cost, are retranslated using the exchange rates at the date of the transaction. Non-monetary items denominated in foreign currencies that are measured at fair value, are retranslated to the functional currency at the exchange rates at the date when the fair value was determined. Exchange differences arising on retranslations are recognised in profit or loss. Foreign branch Foreign branches that have other functional currencies are translated to NOK by translating the income statement at average exchange rates for the period of activity, and by translating the balance sheet at exchange rates at the reporting date. Exchange differences are recognised as a separate component of equity. On disposal of the foreign operation, the cumulative amount of the exchange difference recognised in other comprehensive income relating to that foreign branch is recognised in profit of loss, when the gain or loss on disposal is recognised. Exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form a part of the net investment in the foreign branch and are recognised in other comprehensive income. Goodwill arising on the acquisition of a foreign portfolio and fair value adjustments of the carrying amount of assets and liabilities arising on the acquisition of the foreign branch are treated as assets and liabilities of the foreign operation. TANGIBLE assets Owner-occupied property, plant and equipment Recognition and measurement Items of owner-occupied property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment Depreciation Each component of owner-occupied property, plant and equipment are depreciated using the straight-line method over estimated useful life. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows owner-occupied property 10-50 years plant and equipment 3-5 years Depreciation method, expected useful life and residual values are reassessed annually. An impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount. Investment properties Investment properties are properties held either to earn rental income or for capital appreciation, or for both. These properties are not used in production, deliveries of goods and services, or for administrative purposes. Investment properties are measured initially at cost, i.e. the purchase price including directly attributable expenses associated with the purchase. Investment properties are not depreciated. Subsequent to initial recognition investment properties are measured at fair value, and any changes in fair value are recognised in profit or loss. Fair value is based on market prices, after consideration of any differences in type, location or condition of the individual property. Where market prices are not available, the properties are individually assessed by discounting the expected future net cash flow by the required rate of return for each investment. The net cash flow takes into account existing rental contracts and expectations of future rental income based on the current market situation. The required rate of return is determined based on the expected future risk-free interest rate and an individually assessed risk premium, dependent on the rental situation and the location and standard of the building. An observation of yields reported from market transactions is also performed. The valuation is carried out both by external and internal expertise having substantial

156 gjensidige AnnUAL REPORT 2010 experience in valuing similar types of properties in geographical areas where the Group s investment properties are located. In cases of change of use and reclassification to owner-occupied property, fair value at the date of the reclassification is used as cost for subsequent reporting. INTANGIBLE assets Goodwill Goodwill acquired in acquisition of portfolios represents cost price of the acquisition in excess of the company s share of the net fair value of identifiable assets, liabilities and contingent liabilities in the acquired portfolio at the time of acquisition. Goodwill is recognised initially at cost and subsequently measured at cost less accumulated impairment losses. Goodwill acquired in acquisition of portfolios is not amortised, but is tested for impairment annually or more frequently, when indications of impairment losses exist. Other intangible assets Other intangible assets which consist of customer relationships, trademarks, internally developed software and other intangible assets that are acquired separately or as a group are recognised at historical cost less accumulated amortisation and accumulated impairment losses. New intangible assets are capitalized only if future economic benefits associated with the asset are probable and the cost of the asset can be measured reliably. Development expenditures (both internally and externally generated) is capitalized only if the development expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete the development and to use or sell the asset. Amortisation Intangible assets, other than goodwill is amortised on a straight-line basis over the estimated useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows customer relationships 10 years trademarks 10 years internally developed software 5 8 years other intangible assets 5 10 years The amortisation period and amortisation method are reassessed annually. An impairment loss is recognised if the carrying amount of an asset is less than the recoverable amount. IMpairMent OF NON-FinanCial assets Indicators of impairment of the carrying amount of tangible and intangible assets are assessed at each reporting date. If such indicators exist, then recoverable amount of an assets or a cash generating unit is estimated. Indicators that are assessed as significant by the Group and might trigger testing for an impairment loss are as follows significant reduction in earnings in relation to historical or expected future earnings significant changes in the Group s use of assets or overall strategy for the business significant negative trends for the industry or economy other external and internal indicators Goodwill is tested for impairment annually. The annual testing of goodwill is performed in the third quarter. Recoverable amount is the greater of the fair value less costs to sell and value in use. In assessing value in use, estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets generating cash inflows that are largely independent of cash inflows from other assets or groups of assets (cash-generating unit). Goodwill is allocated to the cash-generating unit expecting to benefit from the acquisition. Impairment losses are recognised in profit or loss if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to the carrying amount of goodwill and then proportionally to the carrying amount of each asset in the cash-generating unit. Previously recognised impairment losses are reversed if the prerequisites for impairment losses are no longer present. Impairment losses will only be reversed if the recoverable amount does not exceed the amount that would have been the carrying amount at the time of the reversal if the impairment loss had not been recognised. Impairment losses recognised for goodwill will not be reversed in a subsequent period. On disposal of a cash generating unit, the goodwill attributable will be included in the determination of the gain or loss on disposal. TEChniCal provisions Provision for unearned premiums, gross The provision for unearned premiums, gross reflects the accrual of premiums written. The provision corresponds to the unearned portions of the premiums written. No deduction is made for any expenses before the premiums written are accrued. In the case of group life insurance for the commercial market, the provision for unearned premiums, gross also includes provisions for fully paid whole-life cover (after the payment of disability capital). Claims provision, gross The claims provision comprise provisions for anticipated future claims payments in respect of claims incurred, but not fully settled at the reporting date. These include both claims that have been reported to the company (RBns reported but not settled) and those that have not yet been reported (IBNR incurred but not reported). The provisions related to reported claims are assessed individually by the Claims Department, while the IBNR provisions are calculated based on empirical data for the time it takes from a loss or claim occurring (date of loss) until it is reported (date reported). Based on experience and the development of the portfolio, a statistical model is prepared to calculate the scope of post-reported claims. The appropriateness of the model is measured by calculating the deviation between earlier post-reported claims and post-reported claims estimated by the model. Adequacy test A yearly adequacy test is performed to verify that the level of the provisions is sufficient compared to the company s liabilities. Current estimates for future claims payments for the company s insurance

gjensidige AnnUAL REPORT 2010 157 liabilities at the reporting date, as well as related cash flows, are used to perform the test. This includes both claims incurred before the reporting date (claims provisions) and claims that will occur from the reporting date until the next annual renewal (premium provisions). Any negative discrepancy between the original provision and the liability adequacy test will entail provision for insufficient premium level. Reinsurers share of insurance-related liabilities in general insurance, gross Reinsurers share of insurance-related liabilities in general insurance, gross is classified as an asset in the balance sheet. Reinsurers share of provision for unearned premiums, gross and reinsurers share of claims provision, gross are included in reinsurers share of insurancerelated liabilities in general insurance, gross. The reinsurers share is less expected losses on claims based on objective evidence of impairment losses. FinanCial instruments Financial instruments are classified in one of the following categories at fair value through profit or loss available for sale investments held to maturity loans and receivables financial derivatives financial liabilities at amortised cost Recognition and derecognition Financial assets and liabilities are recognised when Gjensidige becomes a party to the instrument s contractual terms. Initial recognition is at fair value. For instruments that are not derivatives or measured at fair value through profit or loss, transaction expenses that are directly attributable to the acquisition or issuance of the financial asset or the financial liability, are included. Normally the initial recognition value will be equal to the transaction price. Subsequent to initial recognition the instruments are measured as described below. Financial assets are derecognised when the contractual rights to cash flows from the financial asset expire, or when the Group transfers the financial asset in a transaction where all or practically all the risk and rewards related to ownership of the assets are transferred. fair value at the reporting date. Changes in fair value are recognised in profit or loss. The category at fair value through profit or loss comprises the classes shares and similar interests and bonds and other fixed income assets. Available for sale Financial assets available for sale are non-derivative financial assets that have been recognised initially in this category, or are not recognised initially in any other category. Subsequent to initial recognition financial assets in this category are measured at fair value, and gain or loss is recognised in other comprehensive income except for impairment losses, which are recognised in profit or loss. The company has no financial assets in this category. Investments held to maturity Investments held to maturity are non-derivative financial assets with payments that are fixed or which can be determined in addition to a fixed maturity date, in which a business has intentions and ability to hold to maturity with the exception of those that the business designates as at fair value through profit or loss at initial recognition those that meet the definition of loans and receivables Investments held to maturity are measured at amortised cost using the effective interest method, less any impairment losses. The category investments held to maturity comprises the class bonds held to maturity. Loans and receivables Loans and receivables are non-derivative financial assets with payments that are fixed or determinable. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Interest-free loans are issued to finance fire alarm systems within agriculture for loss prevention purposes. These loans are repaid using the discount granted on the main policy when the alarm system is installed. perspective results At fair value through profit or loss Financial assets and liabilities are classified at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. All financial assets and liabilities can be designated at fair value through profit or loss if the classification reduces a mismatch in measurement or recognition that would have arisen otherwise as a result of different rules for the measurement of assets and liabilities the financial assets are included in a portfolio that is measured and evaluated regularly at fair value Gjensidige holds an investment portfolio that is designated at fair value at initial recognition, and that is managed and evaluated regularly at fair value. This is according to the Board of Directors approved risk management and investment strategy, and information based on fair value is provided regularly to the Senior Group Management and the Board of Directors. Transaction expenses are recognised in profit or loss when they incur. Financial assets at fair value through profit or loss are measured at The category loans and receivables comprises the classes loans, receivables related to direct operations and reinsurance, other receivables, prepaid expenses and earned, not received income, cash and cash equivalents, bonds and other fixed income securities classified as loans and receivables and receivables within the Group. Financial derivatives Financial derivatives are used in the management of exposure to equities, bonds and foreign exchange in order to achieve the desired level of risk and return. The instruments are used both for trading purposes and for hedging of other balance sheet items. Any trading of financial derivatives is subject to strict limitations. The Group uses financial derivatives, amongst other to hedge foreign currency exchanges arising from the ownership of foreign subsidiaries with other functional currency. Transaction expenses are recognised in profit or loss when they incur. Subsequent to initial recognition financial derivatives are measured at fair value and changes in fair value are recognised in profit or loss.

158 gjensidige AnnUAL REPORT 2010 The category financial derivatives comprises the classes financial derivatives at fair value through profit or loss. Financial liabilities at amortised cost Financial liabilites are measured at amortised cost using the effective interest method. When the time horizon of the financial liability s due time is quite near in time the nominal interest rate is used when measuring amortised cost. The category financial liabilities at amortised cost comprises the classes other liabilities, liabilities related to direct insurance and reinsurance, accrued expenses and deferred income and liabilities within the Group. Definition of fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm s length distance. Different valuation techniques and methods are used to estimate fair value depending on the type of financial instruments and to which extent they are traded in active markets. Instruments are classified in their entirety in one of three valuation levels in a hierarchy on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Quoted prices in active markets are considered the best estimate of an asset/liability s fair value. When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data. When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/ liabilities is estimated based on valuation techniques which are based on non-observable market data. For further description of fair value, see note 9. Definition of amortised cost Subsequent to initial recognition, investments held to maturity, loans and receivables and financial liabilities that are not measured at fair value are measured at amortised cost using the effective interest method. When calculating effective interest rate, future cash flows are estimated, and all contractual terms of the financial instrument are taken into consideration. Fees paid or received between the parties in the contract and transaction costs that are directly attributable to the transaction, are included as an integral component of determining the effective interest rate. IMpairMent OF FinanCial assets Loans, receivables and investments held to maturity For financial assets that are not measured at fair value, an assessment of whether there is objective evidence that there has been a reduction in the value of a financial asset or group of assets is made on each reporting date. Objective evidence might be information about credit report alerts, defaults, issuer or borrower suffering significant financial difficulties, bankruptcy or observable data indicating that there is a measurable reduction in future cash flows from a group of financial assets, even though the reduction cannot yet be linked to an individual asset. An assessment is first made to whether objective evidence of impairment of financial assets that are individually significant exists. Financial assets that are not individually significant or that are assessed individually, but not impaired, are assessed in groups with respect to impairment. Assets with similar credit risk characteristics are grouped together. If there is objective evidence that the asset is impaired, impairment loss are calculated as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. Available for sale For financial assets available for sale, an assessment to whether the assets are impaired is carried out quarterly. If a decline in fair value of an available-for-sale financial asset, compared to cost, is significant or has lasted longer than nine months, the cumulative loss measured as the difference between the historical cost and current fair value, less impairment loss on that financial asset that previously has been recognised in profit or loss - is removed from equity and recognised in profit or loss even though the financial asset has not been derecognised. Impairment losses recognised in profit or loss are not reversed through profit or loss, but in other comprehensive income. DiviDenD Dividend from investments is recognised when the company has an unconditional right to receive the dividend. Propsed dividend is recognised as a liability in accordance with the Accounting Act and Regulations on Simplified Application of International Accounting Standards (FOR 2008-01-21 nr. 57). This implies that dividend reduces equity in the fiscal year the dividend provision relates to. PROvisiOns Provisions are recognised when the company has a legal or constructive obligation as a result of a past event, it is probable that this will entail the payment or transfer of other assets to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Information about contingent assets are disclosed where an inflow of economic benefits is probable. Information about a contingent liability is disclosed unless the possibility of an outflow of resources is remote. Restructuring Provision for restructuring are recognised when the company has ap proved a detailed and formal restructuring plan which has commenced or has been announced. Provisions are not made for future expenses attributed to the operations. PENSIOns Gjensidige has both defined contribution and defined benefit plans for its employees. The defined benefit plan has been placed in a separate pension fund and is closed to new employees. The defined contribution plan is a post-employment benefit plan under which Gjensidige pays fixed contributions into a separate entity and there is no legal or constructive obligation to pay further amounts. Obligatory contributions are recognised as employee benefit expenses in profit or loss when they are due.

gjensidige AnnUAL REPORT 2010 159 The defined benefit plan is a post-employment benefit plan that entitles employees to contractual future pension benefits. Pension liabilities are determined on the basis of linear earning and using assumptions of length of service, discount rate, future return on plan assets, future growth in wages, pensions and social security benefits from the National Insurance, and estimates for mortality and staff turnover, etc. Plan assets are measured at fair value, and are deducted from pension liabilities in the net pension liabilities in the balance sheet. Any surplus is recognised if it is likely that the surplus can be used. Any actuarial gains and losses related to defined benefit plan is recognised in other comprehensive income. Share-based payment The fair value of share-based payment arrangements allocated to employees is at the time of allocation recognised as personnel costs, with a corresponding increase in equity. Share-based payment arrangements which are recovered immediately are recognised as expenses at the time of allocation. None-recovery conditions are reflected in the measurement of fair value, and no adjustment of the amount recognised as expenses is done upon failing to meet such conditions. Share-based payment transactions in which the company receives goods or services as payment for the company s own equity instruments is recognised as share-based payment transactions with settlement in equity, regardless of how the company has acquired the equity instruments. Share-based payment arrangements settled by one of the shareholders in the ultimate mother company is also recognised as a share-based payment transaction with settlement in equity. TAX Income tax expense comprises the total of current tax and deferred tax. Current tax Current tax is tax payable on the taxable profit for the year, based on tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. income. If deferred tax arises in connection with the initial recognition of a liability or asset acquired in a transaction that is not a business combination, and it does not affect the financial or taxable profit or loss at the time of the transaction, then it will not be recognised. Deferred tax liabilities are recognised for temporary differences resulting from investments in subsidiaries and associates, except in cases where the Group is able to control the reversal of temporary differences, and it is probable that the temporary difference will not be reversed in foreseeable future. Deferred tax assets that arise from deductible temporary differences for such investments are only recognised to the extent that it is probable that there will be sufficient taxable income to utilise the asset from the temporary difference, and they are expected to reverse in the foreseeable future. Current and deferred tax Current tax and deferred tax are recognised as an expense or income in the income statement, with the exception of deferred tax on items that are recognised in other comprehensive income, where the tax is recognised in other comprehensive income, or in cases where deferred tax arises as a result of a business combination. For business combinations, deferred tax is calculated on the difference between fair value of the acquired assets and liabilities and their carrying amount. Goodwill is recognised without provision for deferred tax. RELATED party transactions Intra-group balances and transactions are eliminated in preparing the consolidated financial statements. The provider of intra-group services, that are not considered core activities, will as a main rule, allocate its incurred net costs (all costs included) based on a Cost Contribution Arrangement as described in OECD Guidelines chapter 8 and on the basis of paragraph 13-1 in the Norwegian Tax Act. Identified functions that are categorized as core activities will be charged out with a reasonable mark up or alternatively at market price if identifiable, comparable prices exist. perspective results Deferred tax Deferred tax is determined based on differences between the carrying amount and the amounts used for taxation purposes, of assets and liabilities at the reporting date. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that they can be offset by future taxable TRANSACtiOns With AFFiliateD COMpanies The Fire Mutuals operates as agents on behalf of Gjensidige Forsikring. For these services commission is paid. For handling the cooperation and to reinsure the Fire Mutuals fire insurance Gjensidige receives cost refunds. Due to the fire policy reinsurance plan, Gjensidige Forsikring also manages assets on behalf of the Fire Mutuals. The Fire Mutuals are credited interest for these assets.

160 gjensidige AnnUAL REPORT 2010 NoteS 1 - EQuity Share capital At the end of the year the share capital consisted of 500 million ordinary shares with a nominal value of NOK 2, according to the statutes. All issued shares are fully paid in. The owners of ordinary shares have dividend and voting rights. There are no rights attached to the holding of own shares. In thousand equity certificates/shares 2010 Outstanding 1 January 100,000 Share split 400,000 Outstanding 31 December 500,000 In connection with conversion from limited liability mutual (BA) to public limited liability company (ASA) on 28 June 2010 the equity certificate capital is converted to share capital. In thousand equity certificates 2009 Outstanding 1 January 77,200 Capital reduction 22,800 Outstanding 31 December 100,000 As at 30 September 2009 the equity certificate capital was reduced to NOK 1,000.0 million, divided into 100 million equity certificates with a nominal value of NOK 10. The amount being reduced was transferred with equal amounts to premium reserve and equalization fund belonging to class I capital. The change did not change the ownership fraction between class I capital and class ii capital. Own shares At the end of the year the number of own shares was 26,983 (0). In the column for own shares the nominal value of the company s holdings of own shares is presented. Amounts paid in that exceeds the nominal value is charged to other equity so that the cost of own shares reduces the Group s equity. Premium reserve Premium reserve consists of paid in capital and can be used to cover losses. Other paid in equity Other paid in equity consists of wage costs that are recognised in profit and loss as a result of the share purchase program for employees. Exchange differences Exchange differences consist of exchange differences that occur when converting foreign subsidiaries, and when converting liabilities that hedge the company s net investment in foreign subsidiaries. Actuarial gains/losses pension Actuarial gains/losses pension consists of gains/losses occurring by changing the actuarial assumptions used when calculating pension liability. Other earned equity Other earned equity consists of this year s and previous year s retained earnings that are not disposed to other purposes. Dividend Proposed and approved dividend NOK million 2010 2009 As at 31 December NOK 4.70 per ordinary share (2009: NOK 3.30) 2,350.0 1,650.0

gjensidige AnnUAL REPORT 2010 161 2 use OF estimates The preparation of the financial statements under IFRS and the application of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the carrying amounts of assets and liabilities, income and expenses. The estimates and the associated assumptions are based on experience and other factors that are assessed as being justifiable based on the underlying conditions. Actual figures may deviate from these estimates. The estimates and associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods. The accounting policies that are used by Gjensidige in which the assessments, estimates and prerequisites may deviate significantly from the actual results are discussed below. Investment properties Fair value is based on market prices and generally accepted valuation models where there are no market prices. A key parameter of the valuation is the long-term required rate of return for the individual property. A further description of the real estate price risk and a sensitivity analysis of investment properties are given in note 8. Plant and equipment, OWner-OCCupied property and intangible assets Plant and equipment, owner-occupied property and intangible assets are assessed annually to ensure that the depreciation method and the depreciation period used are in accordance with useful life. The same applies to residual value. Impairment losses will be recognised if impairment exists. An ongoing assessment of these assets is made in the same manner as investment properties. Goodwill is tested for impairment annually or more often if there are indications that the amounts may be subject to impairment. The testing for impairment entails determining recoverable amount for the cashgenerating unit. Normally recoverable amount will be determined by means of discounted cash flows based on business plans. The business plans are based on prior experience and the expected market development. See note 5 and 7. Financial assets and liabilities The fair value of financial assets and liabilities that are not traded in an active market (such as unlisted shares) is determined by means of generally accepted valuation methods. These valuation methods are based primarily on the market conditions at the reporting date. See note 9. Loans and receivables For financial assets that are not measured at fair value, it is assessed whether there is objective evidence that there has been a reduction in the value of a financial asset or a group of financial assets on each reporting date. See note 11. Insurance-related liabilities Use of estimates in calculation of insurance-related liabilities is primary applicable for claims provisions. Insurance products are divided in general into two main categories; lines with short or long settlement periods. The settlement period is defined as the length of time that passes after a loss or injury occurs (date of loss) until the claim is reported and then paid and settled. Short-tail lines are e.g. property insurance, while long-tail lines primarily involve accident and health insurances. The uncertainty in short-tail lines of business is linked primarily to the size of the loss. For long-tail lines, the risk is linked to the fact that the ultimate claim costs must be estimated based on experience and empirical data. For certain lines within accident and health insurances, it may take ten to 15 years before all the claims that occurred in a calendar year are reported to the company. In addition, there will be many instances where information reported in a claim is inadequate to calculate a correct provision. This may be due to ambiguity concerning the causal relationship and uncertainty about the injured party s future work capacity etc. Many personal injury claims are tried in the court system, and over time the level of compensation for such claims has increased. This will also be of consequence to claims that occurred in prior years and have not yet been settled. The risk linked to provisions for lines related to insurances of the person is thus affected by external conditions. To reduce this risk, the company calculates its claims liability based on various methods and follows up that the registered provisions linked to ongoing claims cases are updated at all times based on the current calculation rules. See note 3 and 14. Pension The present value of pension liabilities is calculated on the basis of actuarial and financial assumptions. Any change in the assumptions affects the estimated liability. Changes in the discount rate is the assumption most significant to the value of the pension liability. The discount rate and other assumptions are normally reviewed once a year when the actuarial calculations are performed unless there have been significant changes during the year. See note 15. perspective results 3 ManageMent OF insurance and FinanCial risk For information about insurance and financial risk please refer to note 3 in the notes to the consolidated financial statements, that covers both Gjensidige Forsikring ASA and the Gjensidige Insurance Group.

162 gjensidige AnnUAL REPORT 2010 4 premiums and ClaiMS etc. in general insurance For segment information according to IFRS 8 please refer to note 4 in the consolidated financial statements. The information below is worked out based on the requirements in the Norwegian Financial Reporting Regulations for Insurance Companies. PRIVATE insurances NOK million Comprehensive (incl. fire) Motor Of which third party liability Of which other classes Small craft and pleasure craft Accident Travel Oter private Total private Underwriting result Gross premiums written 1,918.1 4,268.1 1,868.3 2,399.7 215.1 621.7 426.1 163.3 7,612.4 Gross premiums earned 1,844.3 4,174.9 1,839.9 2,334.9 207.2 602.4 407.3 159.0 7,395.0 Gross claims incurred (1,680.6) (3,104.8) (1,370.8) (1,734.0) (130.6) (471.3) (289.4) (115.4) (5,792.1) Operating expenses gross (320.5) (766.8) (360.2) (406.6) (50.9) (119.0) (95.4) (41.0) (1,393.5) Underwriting result (156.7) 303.3 109.0 194.3 25.6 12.1 22.5 2.6 209.4 Gross claims incurred Incurred during the year (1,661.3) (3,122.6) (1,379.8) (1,742.8) (125.5) (499.8) (288.3) (125.4) (5,823.0) Incurred previous years (19.3) 17.8 9.1 8.7 (5.1) 28.5 (1.1) 10.0 30.8 Gross claims incurred (1,680.6) (3,104.8) (1,370.8) (1,734.0) (130.6) (471.3) (289.4) (115.4) (5,792.1) Technical provisions Provision for unearned premiums, gross 1,027.1 2,086.9 901.8 1,185.1 92.4 235.2 196.3 71.8 3,709.7 Claims provision, gross 1,040.4 4,904.8 4,273.1 631.7 71.1 2,114.6 134.4 21.2 8,286.5 Gross loss liability 795.4 3,805.7 3,315.5 490.2 68.9 1,341.0 112.0 19.8 6,142.8 Security provision 1,103.3 FSAN 1 minimum requirement 1,103.3 COMMerCial insurances NOK million Comprehensive - Comprehensive - other industrial comm. risks risks Motor Of which third party liability Of which other classes Collective acci- Workers General compensatiodent and liability health Livestock Aquaculture Cargo Other comm. - nonmarine One-year risk life insurance Total comm. - nonmarine Underwriting result Gross premiums written 1 041.9 1 785.3 1 130.1 468.9 661.2 447.3 828.7 362.9 80.6 32.2 41.6 42.8 1 461.1 7 254.3 Gross premiums earned 1 030.1 1 775.7 1 129.2 472.3 656.9 434.6 837.4 373.0 77.2 34.0 45.6 40.9 1 457.6 7 235.5 Gross claims incurred (866.5) (1 516.2) (944.6) (452.7) (491.9) (316.0) (767.9) (393.4) (48.9) (2.0) (9.9) (10.6) (927.9) (5 804.0) Operating expenses gross (151.2) (373.4) (249.1) (115.5) (133.6) (93.1) (93.2) (41.5) (15.3) (4.5) (6.1) (12.6) (311.5) (1 351.6) Underwriting result 12.5 (113.8) (64.6) (96.0) 31.4 25.5 (23.6) (61.9) 12.9 27.4 29.7 17.7 218.2 79.9 Gross claims incurred Incurred during the year (875.7) (1 623.7) (922.3) (427.3) (495.0) (297.2) (748.3) (339.2) (58.8) (13.1) (21.2) (20.6) (1 001.7) (5 922.0) Incurred previous years 9.3 107.5 (22.3) (25.4) 3.1 (18.8) (19.6) (54.3) 9.9 11.0 11.3 10.0 73.8 118.1 Gross claims incurred (866.5) (1 516.2) (944.6) (452.7) (491.9) (316.0) (767.9) (393.4) (48.9) (2.0) (9.9) (10.6) (927.9) (5 804.0) Technical provisions Provision for unearned premiums, gross 392.5 726.7 423.1 160.7 262.4 148.1 218.5 58.0 36.0 8.3 15.8 9.0 517.6 2 553.8 Claims provision, gross 1 103.6 1 197.2 1 114.5 957.0 157.5 801.1 5 097.9 2 148.1 52.0 15.2 19.4 3.2 2 256.2 13 808.4 Gross loss liability 913.0 957.7 629.6 540.6 89.0 629.4 4 322.1 1 407.9 49.7 9.2 14.4 3.2 2 256.2 11 192.4 Security provision 1 205.6 FSAN 1 minimum requirement 1,205.6 1 The Financial Supervisory Authority of Norway.

gjensidige AnnUAL REPORT 2010 163 4 premiums and ClaiMS etc. in general insurance (COnt). Marine and energy insurances INWarD reinsurance Other NOK million Blue water hull Coastal hull Energy Total marine and energy insurances Pro - portional Nonproportional Total inward reinsurance Pool arrangements Total Gjensidige Forsikring Underwriting result Gross premiums written 208.0 208.0 785.7 170.8 956.5 282.0 16,313.1 Gross premiums earned 216.4 216.4 785.7 170.8 956.5 291.0 16,094.4 Gross claims incurred (208.3) (208.3) (740.2) 0.8 (739.4) (49.7) (12,593.5) Operating expenses gross (29.8) (29.8) (119.4) (3.4) (122.8) (2,897.7) Underwriting result (21.7) (21.7) (73.9) 168.2 94.3 241.3 603.2 Gross claims incurred Incurred during the year (241.4) (241.4) (740.0) (740.0) (47.1) (12,773.5) Incurred previous years 33.1 33.1 (0.2) 0.8 0.6 (2.6) 180.0 Gross claims incurred (208.3) (208.3) (740.2) 0.8 (739.4) (49.7) (12,593.5) Technical provisions Provision for unearned premiums, gross 24.8 24.8 1.0 1.0 117.5 6,406.7 Claims provision, gross 18.0 281.7 43.6 343.3 340.5 35.4 375.9 157.7 22,971.8 Gross loss liability 18.0 170.3 43.6 231.9 375.9 375.9 157.7 18,100.7 Security provision 33.0 56.5 2,398.4 FSAN 1 minimum requirement 33.0 56.5 2,398.4 perspective results PROvisiON FOR unearned premiums ClaiMS provision NOK million Gross Net of reinsurance Gross Net of reinsurance Pool arrangements Norwegian Natural perils fund 117.5 117.5 58.6 58.6 Norwegian Occupational Injury Insurers' Bureau 49.4 49.4 Norwegian Motor Insurers' Bureau 46.6 46.6 Norwegian Pharmapool 3.1 3.1 Total pool arrangements 117.5 117.5 157.7 157.7 1 The Financial Supervisory Authority of Norway.

164 gjensidige AnnUAL REPORT 2010 5 intangible assets NOK million Goodwill Customer relationships Trademarks Internally developed software Other intangible assets Total Cost As at 1 January 2009 245.1 881.2 1,126.3 Additions 155.3 16.2 7.5 179.0 Additions from internal development 20.7 20.7 Disposals (0.8) (0.8) Exchangerate differences (3.3) (0.3) (0.2) (3.8) As at 31 December 2009 152.0 15.8 272.4 881.2 1,321.4 Uncompleted projects 82.0 82.0 As at 31 December 2009, including uncompleted projects 152.0 15.8 354.4 881.2 1,403.4 Amortisation and impairment losses As at 1 January 2009 (81.3) (864.4) (945.7) Amortisation recognised during the period (1.8) (52.3) (16.9) (71.0) Disposals 0.3 0.3 Impairment losses reversed in profit or loss during the period 0.1 As at 31 December 2009 (1.8) (133.3) (881.3) (1,016.3) Carrying amount As at 1 January 2009 204.7 16.8 221.5 As at 31 December 2009 152.0 14.1 221.1 387.1 Cost As at 1 January 2010 152.0 15.8 272.4 881.2 1,321.4 Additions 899.2 335.2 53.4 105.2 54.8 1,447.8 Additions from internal development 29.8 29.8 Exchangerate differences (15.6) (8.7) (1.5) (0.7) (1.6) (28.1) As at 31 December 2010 1,035.6 342.4 51.8 406.7 934.4 2,770.9 Uncompleted projects 75.7 75.7 As at 31 December 2010, including uncompleted projects 1,035.6 342.4 51.8 482.4 934.4 2,846.5 Amortisation and impairment losses As at 1 January 2010 (1.8) (133.3) (881.3) (1,016.3) Amortisation recognised during the period (34.4) (7.6) (87.1) (8.1) (137.1) Exchangerate differences 0.5 0.2 0.5 0.2 1.6 As at 31 December 2010 (35.6) (7.4) (219.8) (889.1) (1,151.9) Carrying amount As at 1 January 2010 152.0 14.1 221.1 387.1 As at 31 December 2010 1,035.6 306.8 44.4 262.6 45.3 1,694.7 Amortisation method N/A Straight-line Straight-line Straight-line Straight-line Useful life (year) N/A 10 10 5-8 5-10

gjensidige AnnUAL REPORT 2010 165 5 intangible assets (COnt.) The company s intangible assets are either acquired or internally developed. Goodwill and customer relationships are acquired through acquisition of portfolios, and are a result of a purchase price allocation of initial cost of the acquisition. Internally developed software is developed for use in the insurance business. External and internal assistance used in relation with implementation or substantial upgrade of software, including adjustment of standard systems, are capitalised as intangible assets. Amortisation is included in Insurance-related administration expenses including commissions for received reinsurance and sales expenses. Disposals of other intangible assets concerns amortised insurance portfolios. None of the intangible assets have undetermined useful lives. Impairment testing OF goodwill The carrying amount of goodwill in the company as at 31 December 2010 is NOK 1,035.6 million. Of this NOK 162.4 million is related to Gjensidige Forsikring ASA, Swedish branch s acquisition of the insurance portfolio from the subsidiary Tennant Försäkringsaktiebolag AB at 1 October 2009 and NOK 873.2 million related to Gjensidige Forsikring ASA, Danish branch s acquisition of insurance portfolio from Fair Forsikring A/S and Kommuneforsikring A/S 1 January 2010 and from Nykredit Forsikring A/S from 1 October 2010. The branches are independent cash-generating units. An annual assessment of impairment was carried out in the third quarter 2010. There has also been carried out an indication assessment during the fourth quarter in order to assess whether there is new evidence that calls for a new impairment assessment. Recoverable amount for the cash-generating units is determined based on an assessment of value in use. The value in use is based on a discounting of future cash flows, with a relevant discount rate that takes into account maturity and risk. Budgets/prognoses and the period for which the cash flows are projected The projection of cash flows is based on budgets for the next three years reviewed by the management and approved by the Board of Directors. In the period after 2014 an annual growth of three per cent has been projected in until 2019. The terminal value is calculated in 2019. The growth in is grounded in the fact that the companies are small and with a solid parent company, which gives them good chances of increasing market shares. The cash flows are estimated to a normal level before a terminal value is calculated. Gjensidige normally has a tenyear horizon on its models, as the company is in a growth phase and a shorter period will not give a correct view of expected cash flows. The management s method As far as possible, the management has sought to document the assumptions upon which the models are based through external information. External information is first and foremost used in the assessment of discount rate and exchange rates. When it comes to future cash flows, the management has also considered the degree of historical achievement of budgets. If expected budgeted results are not achieved, the management has conducted a deviation analysis. These deviation analyses are reviewed by the Boards of Directors of the respective subsidiaries, as well as by the management in Gjensidige Forsikring. Level of combined ratio (CR) The expected CR level is considered to be somewhat higher in the growth period than at the point in time when the terminal value is calculated. See table. Growth rate The growth rate is considered to be 3.0 per cent. This is based on the following assumptions Long-term real BNP growth 2-3 % Long-term expected inflation 2-3 % Total nominal growth expectation 4-6 % Based on an overall assessment the management has nevertheless chosen to use a 3.0 per cent growth expectation, as this is considered to be more in line with market expectations. Discount rate The discount rate is before tax, and is composed of a risk-free interest rate, a risk premium and a market beta. The risk-free rate is equivalent to an average of five and ten year interest rate on government bonds in the respective countries the branches operate in. In addition a risk premium of 5.5 percentage points has been added. Sensitivity analysis key assumptions The excess values associated with the acquisition are based on different key assumptions. If these assumptions change significantly from what they are expected to be in the impairment models, a need for impairment may arise. See table. perspective results SENSITIVITY table Discount rate increases by 1 % Growth reduced by 2 % compared to expected next 3 years CR increases by 2 % next 3 years All 3 circumstances occur simultaneosly Gjensidige Forsikring, Danish branch Need for impairment, app. NOK 250 million No need for impairment No need for impairment Need for impairment, app. NOK 340 million Gjensidige Forsikring, Swedish branch Need for impairment, app. NOK 80 million No need for impairment No need for impairment Need for impairment, app. NOK 120 million In Gjensidige Forsikring ASA investments in subsidiaries are accounted for at cost. Exchange differences can thus cause changes in value that causes impairment at company level. The table to the right shows the effect on the company s financial statements. SENSITIVITY TABLE Exchange rate reduced by 10 % Tennant Holding Possible need for impairment, app. NOK 40 million Gjensidige Baltic No need for impairment Gjensidiges Arbejdsskadeforsikring Possible need for impairment, app. NOK 40 million Nykredit Forsikring Possible need for impairment, app. NOK 230 million

166 gjensidige AnnUAL REPORT 2010 6 shares in subsidiaries and associates SUBSIDiaries NOK million Registered office Interest held Cost 31.12.10 Carrying amount 31.12.10 Cost 31.12.09 Carrying amount 31.12.09 Fair Forsikring A/S Copenhagen 100 % 2,668.7 2,668.7 2,668.7 2,668.7 Gjensidige Bank Holding AS Førde 100 % 1,590.4 1,491.7 1,590.4 1,491.7 Gjensidige Norge AS Oslo 100 % 195.7 1.1 195.7 7.0 Gjensidige Pensjon og Sparing Holding AS Oslo 100 % 761.8 761.8 732.0 732.0 Glitne Invest AS Oslo 100 % 340.1 340.1 340.1 340.1 Oslo Areal AS Oslo 100 % 4,938.1 4,938.1 4,403.1 4,403.1 Gjensidige Baltic Riga 100 % 351.5 347.8 351.5 347.8 Samtrygd Eigedom AS Førde 100 % 6.9 6.9 5.8 5.8 Strandtorget Drift AS Oslo 100 % 0.4 0.4 0.4 0.4 Strandtorget Eiendom AS Oslo 100 % 0.1 0.1 0.1 0.1 Tennant Holding AB Stockholm 100 % 568.3 474.6 568.3 568.3 Gjensidiges Arbejdsskadeforsikring AS Copenhagen 100 % 770.2 770.2 Nykredit Forsikring A/S Copenhagen 100 % 2,669.6 2,669.6 Total shares in subsidiaries 14,862.1 14,471.5 10,856.2 10,565.1 ASSOCiates NOK million Registered office Interest held Cost 31.12.10 Carrying amount 31.12.10 Cost 31.12.09 Carrying amount 31.12.09 Storebrand ASA Oslo 24.3 % 4,604.4 2,567.4 4,604.4 2,567.4 SpareBank 1 SR-Bank Stavanger 10.3 % 866.4 866.4 866.4 866.4 Bilskadeinstituttet AS Oslo 29.5 % 0.4 0.4 0.3 0.3 Forsikring og Finans Sandnes AS (sold during 2010) 0.0 0.0 Forsikringskont. Johansen og Torkelsen AS (sold during 2010) 0.1 0.1 Fossmark Assuranse AS Sold (sold during 2010) 0.0 0.0 Vervet AS including subordinated loan 1 Tromsø 25.0 % 30.8 1.0 30.3 0.5 Total shares in associates 5,502.0 3,435.2 5,501.6 3,434.8 1 Subordinated loan of NOK 24.0 million is included in cost. SUBSIDiaries ADDitiOnal information NOK million Assets Equity Liabilities Revenues 2 Profit/(loss) Share of stock value For the whole company 2010 Fair Forsikring AS (group) 2,457.6 2,456.1 1.4 296.1 129.4 N/A Gjensidige Bank Holding (group) 15,789.6 1,314.9 14,474.6 335.7 24.6 N/A Gjensidige Norge AS 1.2 1.1 0.1 N/A Gjensidige Pensjon og Sparing Holding (group) 7,257.2 462.6 6,794.6 335.8 (20.1) N/A Glitne Invest (group) 647.3 417.1 230.2 544.7 31.6 N/A Oslo Areal AS 5,420.4 4,823.7 596.6 107.0 N/A Gjensidige Baltic 717.5 313.1 404.4 459.3 43.9 N/A Samtrygd Eigedom AS 6.4 6.4 0.1 0.3 N/A Strandtorget Drift AS 1.8 0.5 1.2 N/A Strandtorget Eiendom AS 0.1 0.1 N/A Tennant Holding AB (group) 727.0 344.7 382.3 453.0 41.9 N/A Gjensidiges Arbejdsskadeforsikring A/S 4,221.5 512.0 3,709.5 360.2 54.1 N/A Nykredit Forsikring A/S 2,461.8 1,443.9 1,018.0 116.2 537.9 N/A Total subsidiaries 39,709.2 12,096.3 27,612.9 2,901.1 950.6 2 Operating income. For companies where financial income is operating income, financial income is included. For other companies financial income is not included.

gjensidige AnnUAL REPORT 2010 167 6 shares in subsidiaries and associates (COnt.) SUBSIDiaries - ADDitiOnal information NOK million Assets Equity Liabilities Revenues 2 Profit/(loss) Share of stock value For the whole company 2009 Fair Financial Ireland Limited (liquidated during 2009) 36.2 33.4 N/A Fair Forsikring AS (group) 8,639.5 2,774.9 5,864.6 1,824.8 210.7 N/A Gjensidige Bank Holding (group) 12,757.6 1,241.3 11,516.4 344.1 (51.6) N/A Gjensidige Norge AS 7.2 7.1 0.1 0.1 0.1 N/A Gjensidige Pensjon og Sparing Holding (group) 4,921.8 453.8 4,468.0 28.2 (73.9) N/A Glitne Invest (group) 565.7 396.4 169.3 550.3 44.9 N/A Oslo Areal AS 4,627.3 4,376.7 250.6 313.2 75.0 N/A Gjensidige Baltic 853.9 310.2 543.6 664.8 58.7 N/A Samtrygd Eigedom AS 4.9 4.9 0.1 (0.1) N/A Strandtorget Drift AS 1.5 0.5 1.0 N/A Strandtorget Eiendom AS 0.1 0.1 N/A Gjensidige Sverige AB (group) 946.3 508.5 437.7 648.8 92.8 N/A Total subsidiaries 33,325.8 10,074.4 23,251.4 4,410.7 390.0 ASSOCiates - ADDitiOnal information NOK million Assets Equity Liabilities Revenues 2 Profit/(loss) Share of stock value For the whole company 2010 Storebrand ASA 390,414.0 18,417.0 371,997.0 48,241.0 1,480.0 4,777.9 SpareBank 1 SR-Bank 134,778.0 9,402.0 125,376.0 3,414.0 1,317.0 1,180.6 Bilskadeinstituttet AS 5.3 4.8 0.5 1.6 0.2 N/A Forsikring og Finans Sandnes AS (sold during 2010) N/A N/A N/A N/A N/A N/A Forsikringskontoret Johansen og Torkelsen AS (sold during 2010) N/A N/A N/A N/A N/A N/A Fossmark Assuranse AS (sold during 2010) N/A N/A N/A N/A N/A N/A Vervet AS 109.2 13.1 96.1 0.5 (0.4) N/A Total associates 525,306.5 27,836.9 497,469.6 51,657.1 2,796.8 perspective results ASSOCiates - ADDitiOnal information NOK million Assets Equity Liabilities Revenues 2 Profit/(loss) Share of stock value For the whole company 2009 Storebrand ASA 366,159.0 17,217.0 348,942.0 48,236.0 934.0 4,330.2 SpareBank 1 SR-Bank 124,909.0 8,073.0 116,836.0 2,674.0 1,111.0 1,035.7 Bilskadeinstituttet AS 5.3 4.8 0.5 1.6 0.2 N/A Forsikring og Finans Sandnes AS 0.7 0.4 0.3 2.1 0.1 N/A Forsikringskontoret Johansen og Torkelsen AS 4.0 0.6 3.4 6.7 N/A Fossmark Assuranse AS 0.7 0.1 0.6 2.0 (0.6) N/A Vervet AS 107.6 11.7 95.9 0.8 0.1 N/A Total associates 491,186.3 25,307.6 465,878.7 50,923.2 2,044.8 The investment in SpareBank1 SR-Bank is classified as investments in an associate and is carried at cost. Gjensidige Forsikring ASA owns 16.3 per cent of the primary certificate capital and 10.3 per cent of the equity in the bank, and has not, based solely on the interest held alone, significant influence. However, the company is represented in both the board of directors of SpareBank1 SR-Bank and the nomination committee. This gives Gjensidige Forsikring ASA significant influence and thus the opportunity to participate in the financial and operational decissions of the bank. Gjensidige also owns bonds issued by SpareBank1 SR-Bank. The carrying amount of these bonds is NOK 5.0 million. Percentage of votes held is the same as percentage of interest held for all investments.

168 gjensidige AnnUAL REPORT 2010 7 OWner-OCCupieD property, plant and EQuipMent Owner-occupied Plant and NOK million property equipment 1 Total Cost As at 1 January 2009 243.0 499.9 742.9 Additions 1.8 98.7 100.5 Disposals (0.9) (3.9) (4.8) Exchange differences (0.2) (0.2) As at 31 December 2009 243.9 594.6 838.5 Uncompleted projects 19.3 19.3 As at 31 December 2009, including uncompleted projects 243.9 613.9 857.8 Depreciation and impairment losses As at 1 January 2009 (52.3) (318.4) (370.8) Depreciation for the year (9.0) (53.3) (62.4) Disposals 0.3 1.7 2.1 As at 31 December 2009 (61.0) (370.0) (431.1) Carrying amount As at 1 January 2009 190.7 247.9 438.6 As at 31 December 2009 182.9 243.9 426.7 Cost As at 1 January 2010 243.9 594.6 838.5 Additions 107.5 107.5 Disposals (99.1) (22.2) (121.3) Exchange differences (1.1) (1.1) As at 31 December 2010 144.8 678.8 823.5 Uncompleted projects 53.5 53.5 As at 31 December 2010, including uncompleted projects 144.8 732.3 877.1 Depreciation and impairment losses As at 1 January 2010 (61.0) (370.0) (431.1) Depreciation for the year (6.0) (78.9) (84.9) Disposals 36.5 6.2 42.7 Exchange differences 0.3 0.3 Impairment losses 2 (2.2) (2.2) As at 31 December 2010 (32.8) (442.5) (475.3) Carrying amount As at 1 January 2010 182.9 243.9 426.7 As at 31 December 2010 112.0 289.8 401.8 Depreciation method Straight-line Straight-line Useful life (years) 10-50 3-5 1 Plant and equipment consist mainly of machinery, vehicles, fixtures and furniture. 2 At the end of the first quarter an impairment loss of NOK 2.2 million on an owner-occupied property was recognised. The new value of the property was determined by using the Group s internal valuation model, cf. note 8 investment properties. The valuation was not based on observeable market prices or recent transactions. The carrying amount of the property before the impairment was NOK 16.8 million. Each component of owner-occupied property, plant and equipment are depreciated using the straight-line method over estimated useful life. Land is not depreciated. Estimated useful life for the period and comparable periods are between ten and 50 years for owner-occuppied property, with technical installations having the highest depreciation rate, and between three and five years for plant and equipment. There are no restrictions on owner-occupied property, plant and equipment. Owner-occupied property, plant and equipment are not pledged as security for liabilities. The market value of owner-occupied property exceeds the carrying amount as shown below. For plant and equipment there is no material difference between the carrying amount and the market value. Some equipment, such as furniture, is fully depreciated, but still in use. NOK million 2010 2009 Market value of land and owner-occupied property 122.9 249.4 Carrying amount of land and owner-occupied property 112.0 182.9 Excess value beyond carrying amount 10.9 66.5

gjensidige AnnUAL REPORT 2010 169 8 investment properties NOK million 2010 2009 Statement of financial position As at 1 January 1,163.5 1,170.7 Additions from subsequent expenditure 82.6 32.4 Disposals (128.1) (2.3) Net gains/(losses) from fair value adjustments (15.5) (37.3) As at 31 December 1,102.5 1,163.5 Financial income and expenses from investment properties is shown in note 20. Gjensidige Forsikring carries investment properties at fair value. Investment properties consist of commercial properties that are rented to tenants outside the Gjensidige Insurance Group, or are aquired in accordance with the company s capital management strategy. Properties used by Group companies are classified as owner-occupied property, see note 7. In properties that are both rented to tenants outside the Group and that are used by the Group s own business, the parts held for rent that can be sectioned are classified as investment property. Gjensidige Forsikring owns no investment properties outside of Norway. The average rental period is 4.79 years, and the portfolio of investment properties includes offices and shopping centres. In 2009 and 2010 Gjensidige Forsikring s own valuation model has been used both in the quarterly financial statements and at year-end. In addition, two independent external advisors were brought in to value selected parts of the portfolio at year end, thus ensuring that more than 90 per cent of the carrying amount has been benchmarked against one or two externally assessed values. The Group s valuation model values each property separately. The most important inputs are yield, market rent, contractual rent, potentially vacant premises, the properties long-term normalised operating costs and any investment requirements. Yield is determined based on a normal required rate of return adjusted for the location of the property, type, technical standard and the contracts. The normal required rate of return is determined from the required rate of return that can be derived from transactions in the market, and expectations of interest level and risk adjustment. The market rent is determined from existing contracts on the propery and comparable properties, observations from contractual negotiations, requests for offers and information from realtors on recently signed contracts on comparable properties. Based on market rent, contractual rent, potentially vacant premises and the long-term normalised operating costs, an annual net rent is calculated and discounted by the required rate of return in order to determine the fair value of the property. In addition corrections are made when the need for upgrades is considerable or there are planned reconstructions or rehabilitations. For 2010 the following parameters have been used in the valuation of investment property, which yield the following average value per square meter. perspective results NOK Yield Average market rent Average contractual rent Average value per sqm Total portfolio 6.51 % 1,294.9 1,314.4 18,761.0 The adoption of the above parameters implies a significant level of judge ment. Emphasis is put on this judgement being consistent with that observed in the market and that the judgement is applied consistently from period to period. The table below shows how the sensitivity of the yield and the market rent affects the value of the property portfolio, as it stands as at 31 December 2010. NOK million Market rent reduced by 10 % Market rent as at 31.12.2010 Market rent increased by 10 % Yield increases by 0.25 % 992.4 1,061.7 1,131.0 Yield 6.51 % 1,029.1 1,102.5 1,175.9 Yield decreases by 0.25 % 1,068.6 1,146.4 1,224.2 There are no restrictions with regard to the sale of the investment properties or how income and cash flows generated by the investment properties can be used. At 31 December 2010 there are contractual obligations to tenants for renovation of NOK 2.0 million. Gjensidige Forsikring has no investment properties for leasing or classified as available for sale. There are no loans with collateral in investment properties in 2009 or 2010.

170 gjensidige AnnUAL REPORT 2010 9 FinanCial assets and liabilities NOK million Notes Carrying amount as at 31.12.2010 Fair value as at 31.12.2010 Carrying amount as at 31.12.2009 Fair value as at 31.12.2009 Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 10 434.5 434.5 166.9 166.9 Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 13 3,912.2 3,912.2 6,281.6 6,281.6 Bonds and other fixed income securities 8,463.7 8,463.7 8,448.7 8,448.7 Financial assets held to maturity Bonds held to maturity 13,600.6 14,022.5 14,856.5 15,341.3 Loans and receivables Bonds and other fixed income securities classified as loans and receivables 11 3,903.8 3,926.0 1,364.7 1,379.1 Loans 11 264.6 264.6 328.3 328.3 Receivables related to direct operations and reinsurance 3,379.8 3,379.8 2,976.2 2,976.2 Receivables within the Group 22 190.7 190.7 222.7 222.7 Other receivables 11 123.8 123.8 188.8 188.8 Prepaid expenses and earned, not received income 11 11.5 11.5 7.8 7.8 Cash and cash equivalents 12, 26 775.5 775.5 1,143.9 1,143.9 Total financial assets 35,060.8 35,505.0 35,986.1 36,485.3 Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 10 105.0 105.0 17.7 17.7 Financial liabilities at amortised cost Other liabilities 16 907.4 907.4 892.5 892.5 Liabilities related to direct insurance and reinsurance 310.2 310.2 300.9 300.9 Accrued expenses and deferred income 16 130.6 130.6 128.6 128.6 Liabilities within the Group 22 57.0 57.0 213.7 213.7 Total financial liabilities 1,510.2 1,510.2 1,553.4 1,553.4 Gain/(loss) not recognised in profit or loss 444.2 499.2 VALUATION HIERARCHY 2010 The table shows a valuation hierarchy where financial assets/liabilities measured at fair value through profit or loss are divided into three levels based on the method of valuation. NOK million LEVEL 1 Quoted prices in active markets LEVEL 2 Valuation technique based on observable market data LEVEL 3 Valuation technique based on non-observable market data Total Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 434.5 434.5 Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 210.7 2,010.6 1,690.9 3,912.2 Bonds and other fixed income securities 3,003.4 5,451.8 8.5 8,463.7 Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 105.0 105.0

gjensidige AnnUAL REPORT 2010 171 9 FinanCial assets and liabilities (COnt.) Fair value Financial assets and liabilities measured at fair value are carried at the amount each asset/liability can be settled to in a transaction carried out at arm s length distance. Different valuation techniques and methods are used to estimate fair value depending on the type of financial instruments and to which extent they are traded in active markets. Instruments are classified in their entirety in one of three valuation levels in a hierarchy on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Valuation based on non-observable market data When neither quoted prices in active markets nor observable market data is available, the fair value of financial assets/liabilities is estimated based on valuation techniques which are based on non-observable market data. A financial asset/liability is considered valued based on non-observable market data if fair value is estimated without being based on quoted prices in active markets or observable market data. Financial assets/ liabilities valued based on non-observable market data are classified as level three in the valuation hierarchy. Below the different valuation levels and which financial assets/liabilities are included in the respective levels are accounted for. Quoted prices in active markets Quoted prices in active markets are considered the best estimate of an asset/liability s fair value. A financial asset/liability is considered valued based on quoted prices in active markets if fair value is estimated based on easily and regularly available prices and these prices represent actual and regularly occurring transaction transactions at arm s length distance. Financial assets/liabilities valued based on quoted prices in active markets are classified as level one in the valuation hierarchy. The following financial assets/liabilities are classified as level one in the valuation hierarchy Listed shares norwegian government/government backed bonds and other fixed income securities exchange traded funds Valuation based on observable market data When quoted prices in active markets are not available, the fair value of financial assets/ liabilities is preferably estimated on the basis of valuation techniques based on observable market data. The following financial assets are classified as level three in the valuation hierarchy Unlisted private equity-investments. The private equity investments that are not organized as funds are valued using cash flow analysis, price multiples and recent market transactions. The private equity investments that are organized as funds are valued based on NAV values (Net Asset Value) as reported by the fund administrators in accordance with IPEV guidelines (International Private Equity and Venture capital Valuation) set out by the Equity Venture Capital Association. The NAV values are estimated by the fund administrators by using the valuation techniques best suited to estimate fair value, given the actual circumstances of each underlying investment. Because of late reporting from the funds, the NAV values from the previous quarterly reporting are used in estimating fair value. These values are then adjusted for known events since the last reporting date. The typical known event is the increase/decrease in value on listed shares owned by a fund. Real estate funds. The real estate funds are valued based on reported NAV values as reported by the fund administrators. Because of late reporting from the funds, the NAV values from the previous quarterly reporting are used in estimating fair value. gjensidige s investment in Gjensidige Pensjonskasse. The investment is valued equal to the paid-in equity. perspective results A financial asset/liability is considered valued based on observable market data if fair value is estimated with reference to prices that are not quoted, but are observable either directly (as prices) or indirectly (derived from prices). The following financial assets/liabilities are classified as level two in the valuation hierarchy Currency futures, equity options, forward rate agreements and currency swaps, in which fair value is derived from the value of underlying instruments. These derivatives are valued using common valuation techniques for derivatives (option pricing models etc.). equity funds, bond funds, hedge funds and combination funds, in which fair value is estimated based on the fair value of the underlying investments of the funds. Bonds, certificates or index bonds that are unlisted, or that are listed but where transactions are not occurring regularly. The unlisted instruments in this category are valued based on observable yield curves and estimated credit spreads where applicable. Sensitivity financial assets level three The sensitivity analysis for financial assets valued based on nonobservable market data show the gain/loss of realistic and plausible market scenarios. A decrease in value of ten per cent is considered a realistic and plausible market scenario for both shares and similar interests and for bonds and other fixed income securities that are included in level three in the valuation hierarchy..

172 gjensidige AnnUAL REPORT 2010 9 FinanCial assets and liabilities (COnt.) RECONCILIATION FINANCIAL ASSETS VALUED BASED ON NON-OBSERVABLE MARKET Data (LEVEL 3) 2010 NOK million Net realised/ unrealised gains As at recognised in 1.1.2010 profit or loss Purchases Sales Settlements Transfers into/out of level 3 As at 31.12.2010 Amount of net realised/unrealised gains recognised in profit or loss that are attributable to instruments held as at 31.12.2010 Shares and similar interests 1,137.8 92.5 713.5 (149.1) (103.7) 1,690.9 81.4 Bonds and other fixed income securities 9.0 (0.5) 8.5 (0.5) Total 1,146.8 92.0 713.5 (149.1) (103.7) 1,699.4 80.9 SENSITIVITY FinanCial assets valued based ON NON-Observable Market Data (level 3) 2010 NOK million Sensitivity Shares and similar interests Decrease in value 10 % 169.1 Bonds and other fixed income securities Decrease in value 10 % 0.9 Total 169.9 VALUATION HIERARCHY 2009 The table shows a valuation hierarchy where financial assets/liabilities measured at fair value through profit or loss are divided into three levels based on the method of valuation. NOK million LEVEL 1 Quoted prices in active markets LEVEL 2 Valuation technique based on observable market data LEVEL 3 Valuation technique based on non-observable market data Total Financial assets Financial derivatives Financial derivatives at fair value through profit or loss 166.9 166.9 Financial assets at fair value through profit or loss, initial recognition Shares and similar interests 855.9 4,287.9 1,137.8 6,281.6 Bonds and other fixed income securities 2,704.8 5,734.9 9.0 8,448.7 Financial liabilities Financial derivatives Financial derivatives at fair value through profit or loss 17.7 17.7 RECONCILIATION FINANCIAL ASSETS VALUED BASED ON NON-OBSERVABLE MARKET Data (LEVEL 3) 2009 NOK million As at 1.1.2009 Net realised/ unrealised gains recognised in profit or loss Purchases Sales Settlements Transfers into/out of level 3 As at 31.12.2009 Amount of net realised/ unrealised gains recognised in profit or loss that are attributable to instruments held as at 31.12.2009 Shares and similar interests 1,316.6 (315.0) 281.4 (97.4) (47.9) 1,137.8 (189.0) Bonds and other fixed income securities 3.6 5.4 9.0 5.4 Total 1,320.3 (309.5) 281.4 (97.4) (47.9) 1,146.8 (183.6) sensitivity FinanCial assets valued based ON NON-Observable Market Data (level 3) 2009 NOK million Sensitivity Shares and similar interests Decrease in value 10 % 113.8 Bonds and other fixed income securities Decrease in value 10 % 0.9 Total 114.7

gjensidige AnnUAL REPORT 2010 173 10 FinanCial Derivatives NOK million Principal 31.12.10 Market value 31.12.2010 Principal average 2010 Asset Liability Principal 31.12.10 Market value 31.12.2009 Principal average 2009 Asset Liability Interest-related contracts Forward contracts 10,000.0 19,550.0 4.5 18,550.0 11,990.3 7.1 (2.9) Interest rate futures 518.9 1,022.2 1,885.4 1,204.4 Interest rate swaps 261.6 850.3 (2.6) 350.0 402.9 3.7 Currency-related contracts Forward contracts 16,157.1 14,628.2 423.1 (102.5) 9,682.1 10,287.3 149.8 (14.8) Equity-related contracts Equity options 986.3 204.8 6.8 715.7 42.1 6.4 Total financial derivatives 27,923.8 36,255.5 434.5 (105.0) 31,183.2 23,927.0 166.9 (17.7) Derivatives are used in accordance with «Regulations on General Insurance Companies Asset Management» in order to improve the efficiency of capital management and risk management. The principal volume of derivatives is a gross quantity, and is a measure of the extent of derivatives within the different categories of contracts. The principal average is the average gross principal volume throughout the year. The market value of assets and liabilities state the carrying amount of derivatives as at 31 December. In each asset class the individual asset managers use appropriate derivatives, and most of the financial derivatives mentioned below are used regularly.the use of derivatives is restricted by the agreement with the individual manager, and requirements are made for approved product lists and sufficient expertise and systems on the part of the manager. Short positions (undertakings to sell securities that the company does not already own, or to purchase securities without having sufficient liquid funds to complete the transaction) are normally not permitted. The manager in each asset class may never expose the company to a greater amount than specified in the management mandate. The company s overall exchange risk is hedged approximately 100 per cent using currency futures. The total risk in the equity portfolio has been reduced during the year by investing in options on broad indexes instead of investing in equities. Financial derivates that constitute a part of hedgefunds are not included in the note. Interest-related contracts consist mainly of - interest rate swaps, which are agreements to exchange interest terms on nominal amounts with customers or banks. - Forward rate agreements, which are agreements that set an interest rate on a nominal amount for a future period. - interest rate futures (IRF), which are agreements that secure the buyer a particular interest rate on an amount for a future period. - Bond options, which are agreements giving the right/obligation to purchase or sell bonds at a particular price at or before a future date. - Bond futures, which are agreements to purchase or sell bonds at a particular price at a future date. Currency-related contracts consist mainly of - Currency futures, which are agreements to purchase or sell a particular amount of currency at a specified exchange rate at a future date. - Currency swaps, which are agreements with banks to swap certain amounts of different currencies at a specified exchange rate and to pay interest on these amounts for an agreed period. - Currency options, which are agreements giving the right/obligation to purchase or sell currency at a specified exchange rate at a future date. Equity-related contracts consist mainly of - equity options, which are agreements giving the right/obligation to buy or sell equities at a certain price at or before a future date. - equity swaps, which are agreements to swap equities at a certain price at a future date. - equity futures, which are agreements to buy or sell equities at a certain price at a future date. Commodity-related contracts consist mainly of - Commodity options, which are agreements giving the right/obligation to buy or sell commodity futures at a certain price at or before a future date. These transactions are carried out mainly with banks as counterparties. The credit risk from these activities is considered to be marginal. Both interest-related and currency-related transactions are conducted within established position limits. perspective results

174 gjensidige AnnUAL REPORT 2010 11 LOans and receivables LOans NOK million 2010 2009 Mortgage loans 2.4 2.5 Bonds classified as loans and receivables 3,903.8 1,364.7 Other loans 299.0 373.4 Impairment to fair value (31.2) (42.1) Subordinated loans 0.6 1.9 Provision for impairment losses (6.2) (7.5) Total loans 4,168.4 1,693.0 Bonds are securities classified as loans and receivables in accordance with IAS 39. Other loans are primarily interest-free loans to agricultural customers. The loans are in their entirety intended for installment of fire detection systems with these customers. There is no mortgage attached to the loans, and the terms varies from two years to over 20 years. Gjensidige Forsikring has not offered this type of loan to its customers in 2010 or 2009. The default rate is 1.5 per cent at year end, compared to 0.76 per cent in 2009. The discount rate used is 4.66 per cent. Nominal value Cost Market value NOK million 2010 2009 2010 2009 2010 2009 Subordinated loans Four Seasons Venture iii AS 2.8 2.8 1.3 Norinnova Invest 0.6 0.6 0.6 0.6 0.6 0.6 Vervet AS 1 24.0 24.0 24.0 24.0 Total subordinated loans 24.6 27.3 24.6 27.3 0.6 1.9 1 Vervet AS is 25 per cent owned by Gjensidige Forsikring and is classified as receivables from associates. The subordinated loan was recognised as impairment loss of associates in 2008. Interest does not accrue on the subordinated loans. NOK million 2010 2009 Provision for impairment losses Provision for impairment losses as at 1 January 7.5 6.4 Change in provision for impairment losses for the period (1.3) 1.1 Provision for impairment losses as at 31 December 6.2 7.5 Recognition of impairment losses is done on each loan individually on the basis of objective evidence. Impairment assessments are not done on groups of loans. Beyond the liabilities that arise from insurance contracts, Gjensidige Forsikring has not issued guarantees for which provisions have been made. Other receivables NOK million 2010 2009 Receivables in relation with asset management 20.6 148.9 Outstanding account SOS International 24.8 19.1 Other receivables 78.3 20.7 Total other receivables 123.8 188.8 12 Cash and Cash EQuivalents NOK million 2010 2009 Cash and bank deposits 775.5 1,143.9 Total 775.5 1,143.9 Cash and bank deposits are cash and bank deposits available for day to day business. Weighted average rate for interest earned on cash and bank deposits is approximately 3.1 per cent (2009: app. 3.3 per cent).

gjensidige AnnUAL REPORT 2010 175 13 shares and similar interests NOK million Interest held beyond 10 % 31.12.2010 Norwegian financial shares DnB NOR ASA 17.6 Total Norwegian financial shares 17.6 Other Norwegian shares Statoil ASA 33.2 Orkla ASA 31.1 Norsk Hydro ASA 23.3 Petroleum Geo-Services ASA 19.9 Schibsted ASA 11.0 Yara International ASA 10.1 Telenor ASA 10.0 Odfjell se 6.1 Norwegian Air Shuttle ASA 5.8 Renewable Energy Corporation ASA 5.7 Marine Harvest ASA 5.1 Aker Solutions ASA 5.0 Total other Norwegian shares 166.1 Other foreign shares ABB se 17.0 SeaDrill Ltd 15.9 Other foreign shares 0.1 Total other foreign shares 33.0 perspective results Equity funds Storebrand Global Indeks I 542.9 Capital Intl Emerging Mkt-I $ 270.3 Valueinvest Lux GLB-IC 185.6 DnB NOR Globalspar ii 0.2 Total equity funds 998.9 Private equity investments Fsn Capital ii LP 129.3 HitecVision Private Equity V LP 106.4 HitecVision Private Equity IV LP 85.6 Altor Fund ii LP 83.2 Northzone V KS 61.5 Norvestor V LP 55.5 Norvestor IV LP 49.1 Argentum Secondary ii 46.6 Partners Group European Buyout 2005 (A) LP 46.1 Energy Ventures ii KS 44.3 Northzone IV KS 10,8 % 43.5 Energy Ventures iii LP 34.7 Partners Group Direct Investments 2006 LP 27.5 Verdane Capital VI KS 10,0 % 27.3 LGT Crown European Private Equity PLC 22.7 Energy Ventures ii B is 17,4 % 22.3 Viking Venture ii AS 21.9 Viking Venture iii dis 20.4 NeoMed Innovation IV LP 19.6 BaltCap PEF LP 17.5 Teknoinvest Viii KS 13,9 % 16.5 Convexa Capital Viii AS - klasse B 15.9 HitecVision Asset Solution KS 12.1 CapMan BO IX LP 11.0 Teknoinvest Viii B dis 15,7 % 9.2 Energy Ventures is 17,5 % 9.0

176 gjensidige AnnUAL REPORT 2010 13 shares and similar interests (COnt.) NOK million Interest held beyond 10 % 31.12.2010 Fjord Invest AS 8.9 Verdane Capital V B KS 8.8 Viking Venture AS 8.2 Verdane Capital Vii KS 6.4 Nordic PEP 1 is (Altor fund iii) 12.3 % 5.6 Northzone VI L.P. 5.0 Kapnord Fond AS 4.7 Viking Venture ii B is 16.9 % 4.3 Helgeland Vekst AS 4.0 Tun Media (Landbrukets Medieselskap AS) 3.7 Convexa Capital IV - -B-aksjer 3.1 BTV Investeringsfond AS 3.0 Convexa Capital IV 2.8 Norchip AS 2.5 Rogaland Kunnskapsinvest 2.5 Norinnova 2.1 Berger Eiendom 1.7 Convexa Capital VI AS - klasse B 1.5 Såkorninvest Sør 1.5 Norinnova Invest AS 1.3 Midvest I A 1.2 Other private equity investments 5.5 Total private equity investments 1,127.2 Hedgefunds Winton Futures Fund- Lead Series 180.0 Sector Polaris 144.2 The Winton Evolution Fund 112.9 Sector EuroPower Fund Class A EUR 81.0 Sector Healthcare - A Usd 79.3 Winton Evolution fund, Class H- Euro 67.3 Sector Speculare IV Fund Class A Usd 42.8 Sector Exspec Fund Class A Usd 20.5 HORIZON TACTICAL TRAD Usd-B 12.6 Sector Speculare ii Fund Class A Usd 11.4 Russell Alt. Strat. Fund ii Total Designated Inves 4.7 Total hedgefunds 756.6 Real estate funds CEREP ii 69.6 CEREP iii 63.6 CEREP 25.4 La Salle 17.9 Total real estate funds 176.4 Combination funds FORTis L FUnd-BD CONV WRLD-I 523.2 Total combination funds 523.2 Other investments Gjensidige Pensjonskasse 94.7 % 111.0 Total other investments 111.0 Other branches Shares and similar interests held by Gjensidige Forsikring ASA, Danish branch 2.1 Total shares and similar interests held by other branches 2.1 TOtal shares and similar interests 3,912.2

gjensidige AnnUAL REPORT 2010 177 14 insurance-related liabilities and reinsurers share NOK million 2010 2009 Short-term insurance contracts, gross Provision for unearned premiums, gross 6,406.7 5,620.2 Claims reported and claims handling costs 11,168.8 8,976.7 Claims incurred, but not reported 11,803.0 10,184.5 Total claims provision, gross 22,971.8 19,161.2 Other insurance-related provisions 2,480.4 2,509.3 Total insurance-related liabilities, gross 31,858.9 27,290.8 Short-term insurance contracts, reinsurers' share Reinsurers' share of provision for unearned premiums, gross 22.2 0.5 Claims reported and claims handling costs 386.1 146.3 Claims incurred, but not reported 26.7 8.1 Total reinsurers' share of claims provision, gross 412.8 154.4 Total reinsurers share of insurance-related liabilities, gross 435.0 154.9 Short-term insurance contracts, net of reinsurance Provision for unearned premiums 6,384.5 5,619.8 Claims reported and claims handling costs 10,782.6 8,830.4 Claims incurred, but not reported 11,776.3 10,176.4 Total claims provision, net of reinsurance 22,559.0 19,006.8 perspective results Other insurance-related provisions 2,480.4 2,509.3 Total insurance-related liabilities, net of reinsurance 31,423.9 27,135.9 Movements in insurance-related liabilities and reinsurers share Gross 2010 2009 Reinsurers Net of share reinsurance Gross Reinsurers share Net of reinsurance Claims and claims handling costs Claims reported and claims handling costs 8,976.7 (146.3) 8,830.4 8,962.8 (214.9) 8,747.8 Claims incurred, but not reported 10,184.5 (8.1) 10,176.4 9,380.6 (46.1) 9,334.5 Total as at 1 January 19,161.2 (154.4) 19,006.8 18,343.4 (261.0) 18,082.4 Acquisitions through business combinations 2,042.7 (0.4) 2,042.3 260.9 (0.4) 260.5 Claims paid, prior year claims (5,590.2) 135.9 (5,454.3) (4,697.8) 135.9 (4,561.9) Increase in liabilities Arising from current year claims 13,150.8 13,150.8 9,748.0 9,748.0 - of this paid (5,533.2) (5,533.2) (4,371.9) (4,371.9) Arising from prior year claims (run-off) (230.9) 1.5 (229.3) (63.8) 1.5 (62.3) Other changes, including effects from discounting 2.6 2.6 Exchange differences (28.7) (30.4) (59.1) (60.3) (30.4) (90.6) Total as at 31 December 22,971.8 (47.8) 22,924.0 19,161.2 (154.4) 19,006.8 Claims reported and claims handling costs 11,168.8 (386.1) 10,782.6 8,976.7 (146.3) 8,830.4 Claims incurred, but not reported 11,803.0 (26.7) 11,776.3 10,184.5 (8.1) 10,176.4 Total as at 31 December 22,971.8 (412.8) 22,559.0 19,161.2 (154.4) 19,006.8 Provisions for unearned premiums, gross, short-term insurances As at 1 January 5,620.2 (0.5) 5,619.7 5,368.5 (2.1) 5,366.4 Increase in the period (15,310.6) 398.1 (14,912.5) (12,784.6) 368.5 (12,416.1) Release in the period 16,094.4 (419.8) 15,674.7 13,051.4 (366.9) 12,684.5 Exchange differences 2.6 2.6 (15.1) (15.1) Total as at 31 December 6,406.7 (22.2) 6,384.5 5,620.2 (0.5) 5,619.7

178 gjensidige AnnUAL REPORT 2010 15 PensiOn Gjensidige Forsikring is required to have an occupational pension plan pursuant to the Mandatory Occupational Pension Act. The company s pension plans meet the requirements of the Act. The defined benefit plan is a closed arrangement. New employees become members of the defined contribution plan. DEFineD COntributiON plan Defined contribution plan is a private pension plan which is a supplement to the National Insurance. Contributions from the pension plan come in addition to retirement pension from the National Insurance. The retirement age is 67 years. The plan also includes disability pension and spouse and child s pension subject to specific rules. In Gjensidige Forsikring the employees are given contributions in accordance with the limits for tax-free contributions, at the time being five per cent of salary from 1 to 6 of the social security base amount and eight per cent from 6 to 12 of the social security base amount. Some of Gjensidige Forsikring s branches and subsidiaries have similar defined contribution plans as Gjensidige Forsikring. Contribution to the defined contribution plan is recognised as an expense in the financial year in which the contribution is paid. Amount recognised as expense for the defined contribution plan is NOK 62.4 million (35.2). DEFineD benefit plan The retirement pension together with contributions from the National Insurance and taken into consideration paid-up policies, constitutes about 70 per cent of salary at retirement age, provided a completed contribution time of 30 years. The retirement age is 67 years, while as for the underwriters a retirement age of 65 years applies. The plan also includes disability pension and spouse and child s pension subject to specific rules. In addition, Gjensidige Forsikring has pension liabilities beyond the ordinary collective plan for some employees. This applies to employees with a lower retirement age, employees with salaries above 12 times the social security base amount and supplementary pensions. Pension liabilities are measured at the present value of future pension benefits that for accounting purposes are considered as accrued at the reporting date. Future pension benefits are calculated on the basis of expected salary at the time of retirement. Estimated liability at the reporting date is used when measuring accrued pension liability. Plan assets are measured at fair value. For the valuation of pension funds, estimated value at the reporting date is used. Net pension liability is the difference between the present value of the pension liability and the fair value of the plan assets. A provision is recognised for employers national insurance contributions in periods of underfunding. Net pension liability is presented in the balance sheet under the line Pension liabilities. Difference between estimated pension liability and estimated value of plan assets as at last financial year and estimated pension liability and fair value of plan assets as at the beginning of this year is recognised in other comprehensive income. In the calculation for 2009 a combination of a declining salary and turnover trend, and a higher discount rate, yielded a positive effect on equity of about NOK 400 million. In 2010 a combination of a reduced discount rate and salary adjustment yielded a negative effect on equity of more than NOK 100 million. The company expects to contribute NOK 114.2 million to the defined benefit plan in 2011 (192.3).

gjensidige AnnUAL REPORT 2010 179 15 pension (COnt.) NOK million 2010 2009 Present value of the defined benefit obligation As at 1 January 2,528.4 2,894.7 Acquired pension liability in connection with purchase of insurance portfolio 50.5 Current service cost 62.3 75.5 Interest cost 99.6 100.1 Actuarial gains and losses 112.4 (408.2) Benefits paid (136.3) (133.6) Past service costs (87.7) Foreign currency exchange rate changes (2.9) As at 31 December 2,626.4 2,528.4 Amount recognised in the balance sheet Present value of unfunded plans 412.3 473.7 Present value of funded plans 2,214.1 2,054.8 Present value of the defined benefit obligation 2,626.4 2,528.4 Fair value of plan assets (2,040.8) (1,953.3) Net defined benefit obligation 585.6 575.2 Employers' national insurance contributions 76.7 81.1 Liability recognised in the balance sheet for defined benefit obligation 662.3 656.3 Fair value of plan assets As at 1 January 1,953.3 1,754.2 Expected return on plan assets 113.4 100.7 Actuarial gains and losses 0.7 (15.2) Contributions by the employer 111.2 192.3 Benefits paid (137.7) (78.7) As at 31 December 2,040.8 1,953.3 perspective results Expense recognised in profit or loss Current service cost 62.3 75.5 Interest cost 99.6 100.1 Expected return on plan assets (113.4) (100.7) Past service cost (87.7) Employers' national insurance contributions (5.5) 10.6 Total defined benefit pension cost (44.7) 85.4 The expense is recognised in the following line items in the income statement Insurance-related adm. expenses including provisions for received reinsurance and sales expenses (44.7) 85.4 Actuarial gains and losses recognised in other comprehensive income Cumulative amount as at 1 January (1,729.0) (2,163.7) Adjustment of opening balance (257.0) Recognised during the period (122.9) 434.6 Cumulative amount as at 31 December (2,108.9) (1,729.0) Plan assets comprise Certificates 11.7 % Equities 11.8 % 11.1 % Corporate bonds 78.8 % 70.9 % Money market funds 6.2 % 5.7 % Other 3.3 % 0.6 % Total plan assets 100.0 % 100.0 % Expected rates of return on plan assets Certificates 2.7 % 2.0 % Equities 8.0 % 9.0 % Corporate bonds 5.5 % 5.0 % Money market funds 2.7 % 2.5 % Properties 6.0 % 6.0 % Other 7.0 % 10.0 %

180 gjensidige AnnUAL REPORT 2010 15 pension (COnt.) Expected rates of return on plan assets are based on current asset allocations. Expected return is determined in conjunction with external advisers and takes into account both current and future market expectations when these are available, and historical returns. The actual return on plan assets amounted to 6.57 per cent I 2010 (12.52). The discount rate is based on ten years government bonds in Norway, adjusted for the duration of the pension liabilities. The discount rate is the assumption that has the largest impact on the value of the pension liability. Salary increases, pension increases and change in social security base amount are based on historical observations and expected future inflation. Due to an average age of above 50 years on employees in the defined benefit plan the salary increase does not contain a career addition, and determined salary increase can therefore be lower than in the market in general. The decreasing salary trend applied for 2010 gives an average salary increase of 3.5 per cent. 2010 2009 Actuarial assumptions Discount rate 3.70 % 4.20 % Expected return on plan assets 5.80 % 5.80 % Future salary increases 3.50 % 3.80 % Change in social security base amount 3.25 % 3.70 % Future pension increases 2.00 % 2.10 % Employers national insurance contributions 14.10 % 14.10 % Staff turnover before/after 40 years Decreasing Decreasing Probability of AFP early retirement N/A 31.00 % Sensitivity + 1 %-point discount rate -1 %-point discount rate + 1 %-point salary adjustment - 1 %-point salary adjustment 2010 Change in pension benefits accrued during the year (16.2 %) 23.0 % 20.4 % (15.1 %) Change in pension liability (11.8 %) 15.0 % 6.3 % (5.0 %) 2009 Change in pension benefits accrued during the year (14.7 %) 18.8 % 16.2 % (13.7 %) Change in pension liability (11.2 %) 13.9 % 5.8 % (4.9 %) NOK million 2010 2009 2008 2007 2006 Historical information Present value of the defined benefit obligation 2,626.4 2,528.4 2,894.7 2,553.1 2,096.0 The fair value of the plan assets 2,040.8 1,953.3 1,754.2 1,568.5 1,295.9 Deficit in the plan 585.6 575.2 1,140.5 984.6 800.1 COntraCtual pension (AFP) The liability to pay own risk according to the former arrangement is accounted for as a business specific defined benefit plan. Own risk are still to be paid until the pension liability is fulfilled for the company s own early retirees choosing the former AFP plan. Pension liability for former employees that have chosen to retire before 1 January 2011 is fulfilled as originally planned until everybody has reached 67 years. Hence there will not be a settlement for this group of employees. All employees turning 62 years after 1 January 2011 are entitled to apply for pension according to new AFP arrangement as from 1 January 2011. This implies that the liability regarding earned rights is fully repealed. New AFP constitutes a lifelong addition to retirement pension from the National Insurance and is estimated based on pensionable salary including the year in which he or she is 61 years. AFP can earliest be applied for from the age of 62 years. Yearly AFP will increase by a higher age of withdrawal. AFP is a defined benefit pension plan and should intentionally be accounted for as a pension liability in the balance sheet. There is, however, not sufficient information to recognize a liability in the financial statements for 2010 and the arrangement is therefore recognised as a defined contribution plan. The transition to new AFP arrangement is accounted for as a negative past service cost of NOK 87.7 million and is recognised as income in 2010. No premium to the Fellesordningen for LO/NHO is paid for 2010.

gjensidige AnnUAL REPORT 2010 181 16 provisions and Other liabilities NOK million 2010 2009 Restructuring costs 1 54.7 64.4 Other provisions 7.6 4.7 Total other provisions for liabilities 62.3 69.1 Outstanding accounts Fire Mutuals 190.2 165.2 Accounts payable 78.0 40.7 Liabilities in relation with properties 11.1 24.3 Liabilities in relation with asset management 200.7 Liabilities to public authorities 431.6 344.7 One-off payment to employees 46.0 Other liabilities 196.4 70.9 Total other liabilities 907.4 892.5 Accrued personnel costs 130.6 126.3 Other accrued expenses and deferred income 2.4 Total other accrued expenses and deferred income 130.6 128.6 Restructuring costs1 Provision as at 1 January 64.4 8.0 New provisions 25.0 64.4 Provisions used during the year (34.7) (8.0) Provision as at 31 December 54.7 64.4 perspective results 1 in 2010 it has been decided to make a new provision of NOK 25.0 million in association with the ongoing efficiency improvement measures of Commercial functions. These processes have been communicated to all business areas involved. During 2010 NOK 34.7 million of the provisions of NOK 64.4 milllion from 2009 has been used. 17 tax NOK million 2010 2009 Specification of tax expense Tax payable (286.7) (833.7) Wealth taxes (36.0) Correction previous years 65.9 Change in deferred tax (20.0) 383.6 Total tax expense (240.7) (486.2) Deferred tax liabilities and deferred tax assets Deferred tax liabilities and deferred tax assets are offset when there is a legally enforceable right to offset those assets/liabilities and when deferred tax liabilities/ deferred tax assets relate to the same fiscal authority. The amounts offset are as follows Taxable temporary differences Properties 209.3 156.9 Shares, bonds and other securities 269.9 251.7 Profit and loss account 362.8 451.9 Total taxable temporary differences 842.0 860.4 Deductible temporary differences Loans and receivables (82.2) (111.0) Plant, equipment and intangible assets (129.4) (82.4) Provisions for liabilities (62.3) (69.1) Pension liabilities (662.3) (656.3) Total deductible temporary differences (936.8) (918.8) Net temporary differences (94.2) (58.4) Deferred tax liabilities/(deferred tax assets) (26.4) (16.4)

182 gjensidige AnnUAL REPORT 2010 17 tax (COnt.) NOK million 2010 2009 Reconciliation of tax expense Profit before tax 2,831.0 3,429.8 Estimated tax of profit before tax expense (28 %) (792.7) (960.4) Tax effect of Dividend received 54.0 48.5 Tax exempted income and expenses 103.9 22.0 One-time effect of insurance-related provisions 1 441.4 Non tax-deductible expenses (4.8) (1.8) Wealth taxes (36.0) Consequence of tax relief decision 333.0 Correction previous years 65.9 Total tax expense (240.7) (486.2) Effective rate of income tax (8.5 %) (14.2 %) Change in deferred tax Deferred tax liabilities as at 1 January (16.4) 245.6 Change in deferred tax recognised in profit or loss 20.0 (383.6) Change in deferred tax recognised directly in the balance sheet Pensions (36.4) 121.7 Portfolios acquired 3.7 Exchange differences 2.8 (0.1) Deferred tax liabilites/(deferred tax assets) as at 31 December (26.4) (16.4) Tax recognised in other comprehensive income Pensions 34.6 (121.7) Total tax recognised in other comprehensive income 34.6 (121.7) Tax on items recognised directly in equity Tax payable on dividend costs 13.2 Total tax on items recognised directly in equity 13.2 1 in accordance to changed regulations on annual reporting for insurance companies of 18 December 2009, deferred tax assets should not be recognised on insurance-related provisions classified as share capital, or on reinsurance-provisions. Tax COst In connection with the conversion of Gjensidige Forsikring BA to a public limited company the Ministry of Finance has consented to an exemption from capital gains taxation on the transfer of business to the newly formed public limited company under certain conditions. The consequences of the tax relief decision have been incorporated into the tax expense and tax liabilities from the current quarter. The tax relief decision involves greater complexity and discretionary assessments, which entails a greater degree of uncertainty with respect to the tax expense and tax liabilities until all the effects have ultimately been evaluated by the tax authorities.

gjensidige AnnUAL REPORT 2010 183 18 expenses INSURANCE-relateD ADMinistratiON EXpenses incl. COMMissiOns FOR received reinsurance and sales EXpenses NOK million 2010 2009 Depreciation and value adjustments (note 5 and 7), excl. depreciation properties 215.6 106.9 Employee benefit expenses 1,310.3 1,087.1 Fee for customer representatives 6.3 4.5 Software costs 301.2 282.8 Total auditor s fee (incl. VAT) 9.0 4.2 Consultants and lawyers fees 67.2 61.8 Commissions 401.2 244.0 Other expenses 586.9 634.1 Total insurance-related operating expenses incl. commissions for received reinsurance and sales expenses 2,897.7 2,425.5 Of which sales expenses Employee benefit expenses 688.9 759.0 Commission 269.4 260.4 Other sales expenses 415.2 462.6 Total sales expenses 1,373.5 1,482.0 Other EXpenses NOK million 2010 2009 Commodity costs and other expenses 32.6 12.1 Total other expenses 32.6 12.1 perspective results Other specifications NOK million 2010 2009 Administration expenses related to financial assets, excl. interest expenses, incl. administration expenses properties Depreciation and value adjustments (note 5 and note 7) 6.5 26.4 Other expenses 78.1 96.9 Total administration expenses related to financial assets, excl. interest expenses, incl. administration expenses properties 84.6 123.2 Employee benefit expenses Wages and salaries 1,071.2 800.1 Social security cost 214.7 166.4 Pension cost defined benefit plan (note 15 incl. employers national insurance) 62.4 35.2 Pension cost defined contribution plan (note 15 incl. employers national insurance) (44.7) 85.4 Stock purchase offering for employees allocated in 2010 6.7 Total employee benefit expenses 1,310.3 1,087.1 Auditor's fee (incl. vat) Statutory audit 2.3 1.7 Technical accounting support and legal consultancy 0.1 Other non-assurance services 6.6 2.3 Tax consultant services 0.1 0.2 Total auditor's fee (incl. vat) 9.0 4.2

184 gjensidige AnnUAL REPORT 2010 19 salaries and remuneration 2010 2009 Average number of employees 2,621 2,101 The board OF Directors statement on determining salaries and other remuneration Gjensidige s remuneration policy The Group has established a remuneration scheme that applies to all employees. Remuneration shall be competitive, but not wage leading. It is expected that the employees will view the Group s offer of remuneration and benefits as a total package. The Group s remuneration schemes shall be open and performance-based so that they are regarded as fair and predictable to the greatest possible extent. There shall be conformity between agreed performance and the remuneration that is given. Remuneration and career development shall be associated with the achievement of the Group s expressed strategic and financial goals and core values, where both quantitative and qualitative objectives are included in the assessment. The measurement criteria shall promote long-term economic growth and take the actual capital costs into consideration as much as possible. The remuneration scheme shall help promote and provide incentives for good risk management, counteract excessive risk-taking and avoid conflicts of interest. A regular basic salary shall be the main element in the overall remuneration, which also consists of bonus, pension and benefits in kind. Decision-making process The Board of Directors has established a remuneration committee composed of three members; the chairman of the Board of Directors and two board members. The remuneration committee shall prepare items of business for the Board of Directors and have the main responsibility for: draft proposals for and monitor the compliance with the Group s guidelines for and constraints on remuneration Annually assess and propose the group CEO s remuneration Annually draft a proposal for the group CEO s personal scorecard Be an adviser to the group CEO with regard to the annual assessment of remuneration of the rest of the executive management draft proposals for principles and a statement on determining salaries and other remuneration for the executive management, for employees and their elected representatives with job tasks of crucial importance to the enterprise s risk exposure, and for other employees and elected representatives with supervisory tasks Assess other important personnel-related matters concerning executive management Guidelines FOr the COMing financial year Remuneration of the group CEO The group CEO s salary and other financial benefits are determined by the Board of Directors on the basis of a comprehensive assessment, where Gjensidige s remuneration scheme and the market pay for equivalent positions are taken into consideration. The basic salary is assessed annually and determined on the basis of the wage trend in the society in general and the financial sector in particular. The bonus is determined by the Board of Directors on the basis of agreed objectives and deliveries and can amount to 50 per cent at most of the regular annual salary, included holiday pay. Variable salary is not included in the pensionable income. In the assessment, consideration is given to the enterprise s results in the last two years, together with an assessment of the group CEO s personal contributions to the Group s core values, development and results. Half of the bonus is given in the form of shares in Gjensidige Forsikring ASA, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. The group CEO is not given any performance-based benefits in addition to the abovementioned bonus, but can also be given benefits in kind, such as a company car and coverage of expenses for electronic communication. The awarding of benefits in kind shall be contingent upon the group CEO s function in the Group and must also be in keeping with current market practices. The group CEO has a retirement age of 62. The group CEO has the option to retire at age 60 if the Board of Directors or he himself so desires. The group CEO is entitled to a pension in accordance with Gjensidige s closed defined-benefit pension scheme. In accordance with his employment contract, he is entitled to a pension of 100 per cent of his annual salary upon retirement at age 62, which will subsequently be reduced to 70 per cent of his salary upon reaching age 67 and thereafter. In the event of retirement at age 60, there will be a corresponding contractual reduction from 100 per cent upon retirement to 70 per cent upon turning 67. The company car scheme and other benefits will be maintained until the age of 67. The group CEO has no severance pay agreement if he resigns before reaching retirement age. Remuneration of the rest of the executive management The group CEO determines the financial terms and conditions for the rest of the executive management according to limits that have been discussed with the remuneration committee. Gjensidige s remuneration scheme is used as a basis for these calculations. The total remuneration is determined by the need to offer competitive terms and conditions in the various business areas and shall help attract and retain managers who promote the Group s growth and profitability. The basic salary is assessed annually and determined on the basis of the wage trend in the society in general and the financial sector in particular. The bonuses to the executive management can be paid on the basis of specific performance indicators of defined target areas and discretionary assessments specified in the personal scorecards and derived from the Group s strategies and objectives. In this assessment, consideration is given to a combination of the enterprise s results in the last two years, the business unit in question and an assessment of personal contributions. Half of the bonus is given in the form of shares in Gjensidige Forsikring ASA, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. An upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. The Deputy CEO has a bonus agreement equivalent to the group CEO s agreement, where the bonus can amount to 50 per cent at most of his/her regular annual salary. After consultation with the remuneration committee, the group CEO may make exceptions for the remuneration of special positions if it is necessary in order to offer competitive terms. Awarding of benefits in kind to executive management shall be contingent upon their function in the Group and also in keeping with marketing practices. Members of the group management have a retirement age of 62. With

gjensidige AnnUAL REPORT 2010 185 19 salaries and remuneration (COnt.) only two exceptions, current members of the group management are members of the closed defined-benefit pension scheme. With a full contribution period, these members are entitled to a pension of 70 per cent. The Company will maintain a previous individual pension agreement for one member of the group management.there are no severance pay agreements for managers who resign their position in Gjensidige. Remuneration of employees with job tasks of crucial importance to the enterprise s risk exposure The bonuses to employees with job tasks of crucial importance to the enterprise s risk exposure can be paid on the basis of specific performance indicators of defined target areas and discretionary assessments specified in the personal scorecards and derived from the Group s strategies and objectives. In this assessment, consideration is given to a combination of the enterprise s results in the last two years, the business unit in question and an assessment of personal contributions. Half of the bonus is given in the form of shares in Gjensidige Forsikring ASA, one-third of which can be sold in each of the next three years. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. An upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. After consultation with the remuneration committee, the group CEO can make exceptions for the remuneration of special positions if it is necessary in order to provide competitive terms. The awarding of pensions and benefits in kind complies with the Group s general scheme. Remuneration of employees with supervisory tasks Remuneration of employees with supervisory tasks shall be independent of the results in the operations they supervise. The bonus to employees with supervisory tasks will be based on a discretionary assessment of contributions from the unit in question specified in personal scorecards, plus other personal contributions. Half of the bonus is paid in the form of shares in Gjensidige Forsikring ASA, one-third of which can be sold in each of the next three years. An upper ceiling of 30 per cent of the annual salary, included holiday pay, is set on the payment of bonuses. Variable salary is not included in the pensionable income. The restricted bonus may be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. The awarding of pensions and benefits in kind complies with the Group s general scheme. Remuneration of elected representatives and other employees with remuneration equivalent to executive management The guidelines apply equivalently to elected representatives with job tasks of crucial importance to the enterprise s risk exposure and elected representatives with other supervisory tasks. After a specific assessment, these guidelines may also come into force for other employees with equivalent job tasks and remuneration. Binding guidelines for shares, underwriting rights, etc. for the coming financial year Of bonuses earned in 2011 by the group CEO, executive management, employees with job tasks of crucial importance to the enterprise s risk exposure and employees with supervisory tasks, a percentage equivalent to 50 per cent of the gross bonus earned will be invested in shares in Gjensidige Forsikring ASA. Up to 1/3 of the shares may be sold in each of the three coming years. On an equivalent basis with the other employees in Gjensidige, the group CEO and executive management will be entitled to take part in any share subscription schemes that exist for the employees. Explanation of the executive pay policy in the previous financial year The Board of Directors confirms that the guidelines for executive pay for 2010 presented in last year s statement have been complied with. perspective results Key management personell COMpensation 2010 NOK thousand Fixed salary/fee Variable salary Calculated value of total benefits other than cash Rights earned in the financial year according to defined benefit pension plan 9 Loans, advance payments, guarantees. outstanding amount Number of shares held Interest rate 7 Applicable conditions and installment plan Retirement conditions The Senior Group Management Helge Leiro Baastad, CEO 4,129.3 1,277.6 254.1 1,586.3 6,213 2 Tor Magne Lønnum, Deputy CEO 2,913.7 1,397.0 218.1 663.9 4,213 3 Jørgen Inge Ringdal, Executive Vice President 2,145.5 435.8 194.5 705.5 3,835 2 Trond Delbekk, Executive Vice President 2,390.9 381.7 233.6 658.0 2,319 3 Bjørn Walle (1.1.10-31.8.10) 1, Executive Vice President 1,321.9 269.4 163.8 206.0 4 Petter Bøhler (1.1.10-22.3.10) 1, Executive Vice President 445.3 123.0 46.0 105.8 547.5 3.0 % 20.11.2012 3 Hege Toft Karlsen (1.9.10-31.12.10) 1, Exec. Vice President 591.2 27.7 53.5 76.2 1,965.3 2,348 3.0-3.3 % 16.04.2019 3 Martin Danielsen, Executive Vice President 1,911.2 324.0 162.1 555.8 4,479.6 4,213 3.0-3.3 % 28.04.2019 3 Bjørn Asp, Executive Vice President 2,026.1 418.9 199.2 595.5 5,663.9 3,353 3.0-3.1 % 20.07.2033 3 Kim Rud-Petersen (15.3-31.12.10) 1, Executive Vice President 2,115.3 223.1 136.5 2,244 Lise Westly (1.3-31.12.10) 1, Executive Vice President 1,325.8 164.5 309.7 1,502 The Board of Directors 6 Inge K. Hansen, Chairman 439.0 1.5 5,711 Randi B. Sætershagen, Deputy Chairman 375.0 3.6 2,711 Trond V. Andersen 297.5 2.5 113.9 1,482 5.8 % 20,08,2014 Hans-Erik Andersson 280.0 2.3 1,482 Mari T. Skjærstad (28.6.10-31.12.10) 1 100.0 1.5 Tor Øwre 337.0 7.8 1,482 Gisele Marchand (28.6.10-31.12.10) 1 110.0 1.5 1,235 Karen Marie Hjelmeseter (1.1.10-28.6.10) 1 151.5 1.2 Hans Ellef Wettre (1.1.10-28.6.10) 1 135.0 Per Engebreth Askilsrud (1.1.10-28.6.10) 1, 11 157.5 1.0

186 gjensidige AnnUAL REPORT 2010 19 salaries and remuneration (COnt.) Key management personell COMpensation 2010 NOK thousand Fixed salary/fee Variable salary Calculated value of total benefits other than cash Rights earned in the financial year according to defined benefit pension plan 9 Loans, advance payments, guarantees. outstanding amount Number of shares held Interest rate 7 Applicable conditions and installment plan Retirement conditions Gunnhild H. Andersen, employee 235.0 605 Kjetil Kristensen, employee 235.0 406 Gunnar Mjåtvedt, employee 280.0 799 Marianne Bø Engebretsen (1.1.10-28.6.10) 1, 11, employee 133.5 605 The Board of Directors, deputies 6 Per Andersen (28.6.10-31.12.10) 1, 10 2,711 Per Engebreth Askilsrud (28.6.10-31.12.10) 1, 11 347 Laila S. Dahlen (28.6.10-31.12.10) 1 3.5 1,482 Knud Peder Daugaard (28.6.10-31.12.10) 1 3.5 2,711 Ingun M. Leikvoll (28.6.10-31.12.10) 1 18.5 Sissel Johanne Monsvold 27.8 Wenche Teigland (28.6.10-31.12.10) 1 10.0 Valborg Lippestad (1.1.10-28.6.10) 1 23.0 John Ove Ottestad (1.1.10-28.6.10) 1 13.0 Harald Milli (1.1.10-24.3.10) 1 3.0 Per Gunnar Skorge (24.3.10-31.12.10) 1 3.0 Marianne Bø Engebretsen (28.6.10-31.12.10) 1, 11, employee Marianne Brinch van Meenen (28.6.10-31.12.10) 1, 10, employee 505 Ingvild Sollie Andersen (1.1.10-28.6.10) 1, employee 11.0 Knut Bertil Øygard (1.1.10-28.6.10) 1, employee 13.0 Control comittee 6 Marit Tønsberg (1.1.10-28.6.10) 1, Chairman 216.0 1.2 Sven Iver Steen (28.6.10-31.12.10) 1, 10, Chairman 1,482 Snorre Inge Roald 1.1.10-28.6.10) 1, Deputy Chairman 147.5 Tove Melgård (1.1.10-28.6.10) 1 136.0 3.0 Joar Kavli (1.1.10-28.6.10) 1, Deputy 7.5 5,094.5 3.5 % 19.09.2018 Hallvard Strømme (28.6.10-31.12.10) 1 1.5 Lieslotte Aune Lee (28.6.10-31.12.10) 1 6.5 Vigdis Myhre Næsseth (28.6.10-31.12.10) 1, Deputy 11.5 Supervisory board 5 Kirsten Indgjerd Værdal (1.1.10-28.6.10) 1, 11, Chairman 126.0 0.4 Bjørn Iversen (28.6.10-31.12.10) 1, Chairman 23.0 Trond Bakke (1.1.10-28.6.10) 1, Deputy Chairman 107.5 Kirsten Indgjerd Værdal (28.6.10-31.12.10) 1, 11, Deputy Chairman In addition 43 representatives from the company/fire Mutuals/organisations/employees. 5 1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 percent at age 67 according to time of earning. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 4 Age 60, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 5 Annual fee of NOK three thousand five hundred, in addition to a per meeting fee of NOK three thousand five hundred. There have been three ordinary meetings during 2010. 6 The fee includes a fee for subsidiaries. 7 The interest rate is 3.0 nominal, unless other is stated. 8 For employees only remuneration for the current position is stated. 9 Everyone in the Senior Group Management has pension plans, benefit based or contribution based. 10 The person concerned has not received any fees during 2010. 11 Fee includes all positions held during 2010.

gjensidige AnnUAL REPORT 2010 187 19 salaries and remuneration (COnt.) Key management personell COMpensation 2009 NOK thousand Fixed salary/fee Variable salary Calculated value of total benefits other than cash Rights earned in the financial year according to defined benefit pension plan 9 Loans, advance payments, guarantees. outstanding amount Applicable conditions and install- Interest rate 7 ment plan Retirement conditions The Senior Group Management Helge Leiro Baastad, CEO 4,004.2 1,220.8 231.4 1,839.6 2 Bjørn Asp, Executive Vice President 2,014.4 10.5 200.9 562.5 5,704.8 2.6-2.7 % 20.07.2033 3 Petter Bøhler, Executive Vice President 2,019.3 314.6 190.0 962.6 821.6 2.6 % 20.11.2012 3 Trond Delbekk, Executive Vice President 2,241.2 434.7 207.9 813.1 3 Tor Magne Lønnum, Deputy CEO 2,782.8 538.2 204.9 964.4 3 Jørgen Inge Ringdal, Executive Vice President 2,100.5 322.9 156.8 820.9 479.5 2.6 % 04.06.2019 2 Bjørn Walle, Executive Vice President 1,895.2 224.8 234.0 610.6 4 Erica Blakstad, Executive Vice President 1,866.1 294.8 191.2 1,388.4 3 Martin Danielsen (10.09.09-31.12.09) 1, Executive Vice President 634.4 151.3 54.0 272.8 4,406.0 2.6-2.9 % 28.04.2019 3 Board of Directors 6 Inge K. Hansen, Chairman 380.0 1.5 Randi B. Sætershagen, Deputy Chairman 384.8 8.7 3.2 % 19.02.2018 Hans Erik Andersson 250.0 4.3 Karen Marie Hjelmeseter 210.8 2.3 Hans Ellef Wettre 195.0 1.5 Tor Øwre 319.3 13.3 Cato Litangen (01.01.09-31.03.09) 1 65.0 4.5 Marianne Lie (01.01.09-31.03.09) 1 61.3 1.5 Trond V. Andersen (01.04.09-31.12.09) 1 177.5 1.7 141.2 5.3 % 20.08.2014 Per Engebreth Askilsrud (01.04.09-31.12.09) 1 222.8 2.3 Gunnar Mjåtvedt, employee 185.0 Gunnhild H. Andersen, employee 185.0 Kjetil Kristensen, employee 185.0 Marianne Bø Engebretsen, employee 185.0 perspective results The Board of Directors, deputies 6 Valborg Lippestad 23.0 Harald Milli 14.5 John Ove Ottestad 18.0 Trine Vekseth (01.01.09-31.03.09) 1 9.3 0.6 Sissel Johanne Monsvold (01.04.09-31.12.09) 1 13.5 Ingvild Sollie Andersen, employee 11.0 Christian Kristensen (01.01.09-31.03.09) 1, employee 2.8 Knut Bertil Øygard (01.04.09-31.12.09) 1 8.3 Control comittee 6 Marit Tønsberg, Chairman 115.2 0.6 Snorre Inge Roald, Deputy Chairman 68.7 3.7 Tove Melgård 80.5 4.0 Supervisoy board 5 Kirsten Indgjerd Værdal, Chairman 119.5 5.4 Trond Bakke, Deputy Chairman 39.5 0.6 In connection with the resignation for one member of the Senior Group Management, a severe payment of NOK 2,2 million has been paid. In addition 43 representatives from the company/fire Mutuals/organisations/employees. 5 1 The stated remuneration applies to the period the individual in question has held the position/office. 2 Age 62, 100 per cent salary reducing gradually to 70 percent at age 67 according to time of earning. 3 Age 62, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 4 Age 60, 70 per cent salary until age 67 according to time of earning, then Gjensidige Forsikring s ordinary pension terms will take effect. 5 Annual fee of NOK three thousand, in addition to a per meeting fee. There were two ordinary meetings during 2009. The fees have been of NOK three thousand and three thousand five hundred respectively. 6 The fee includes a fee for subsidiaries. 7 The interest rate is 2.6 nominal, unless other is stated. 8 For employees only remuneration for the current position is stated. 9 Everyone in the Senior Group Management has pension plans, benefit based or contribution based.

188 gjensidige AnnUAL REPORT 2010 20 net income FROM investments NOK million 2010 2009 Net income and gains/( losses) from buildings and real estate Investment properties Rental income from investment properties, excl. unrealised gain/(loss) 80.0 84.9 Net revaluation investment properties (15.5) (37.3) Net gain/(loss) from sale of investment properties 9.2 0.3 Administration expenses related to investment properties (13.1) (18.0) Total net income and gains/(losses) from investment properties 60.5 29.8 Owner-occupied properties Rental income from owner-occupied properties 10.8 17.6 Net gain/(loss) from sale of owner-occupied properties 55.0 2.4 Administration expenses related to owner-occupied properties (10.1) (14.1) Impairment owner-occupied properties (2.2) Total net income and gains/(losses) from owner-occupied properties 53.4 5.8 Total net income and gains/(losses) from from buildings and real estate 113.9 35.7 Net income and gains/(losses) from investments in subsidiaries and associates Net income from associates 292.7 309.5 Impairment investments in subsidiaries and associates (152.2) (3.7) Net gain/(loss) from sale of associates (0.1) Total net income and gains/(losses) from investments in subsidiaries and associates 140.4 305.9 Net income and gain/(loss) from bonds held to maturity Net interest income from bonds held to maturity 756.4 804.9 Unrealised gain/(loss) from bonds held to maturity (11.8) (22.8) Net gain/(loss) from changes in exchange rates on bonds held to maturity (32.9) Total net income and gains/(losses) from bonds held to maturity 744.6 749.2 Net income and gains/(losses) from loans and receivables Net interest income/(expenses) from loans and receivables 134.5 31.4 Net gain/(loss) from loans and receivables 19.7 16.4 Net gain/(loss) from changes in exchange rates on loans and receivables (88.1) (86.8) Total net income and gains/(losses) from loans and receivables 66.1 (39.1) Net income and gains/(losses) from financial assets at fair value through profit or loss, designated Shares and similar interests Dividend income 78.6 2.4 Unrealised gain/(loss) from shares and similar interests 108.4 424.0 Net realised gain/(loss) from shares and similar interests 174.6 (128.9) Total net income and gains/(losses) from shares and similar interests 361.6 297.5 Bonds and other fixed-income securities Net interest income/(expenses) from bonds and other fixed-income-securities 284.1 322.5 Unrealised gain/(loss) from bonds and other fixed-income securities 73.4 (27.7) Net realised gain/(loss) from bonds and other fixed-income securities 287.5 (400.0) Total net income and gains/(losses) from bonds and other fixed-income securities 645.0 (105.2) Derivatives Net interest income/(expenses) from derivatives 1.2 32.0 Unrealised gain/(loss) from derivatives 185.9 581.6 Net realised gain/(loss) from derivatives 21.0 1,010.3 Total net income and gains/(losses) from derivatives 208.1 1,624.0 Total net income and gains/(losses) from financial assets at fair value through profit or loss, designated 1,214.7 1,816.3 Net income and gains/(losses) from financial liabilities at amortised cost Net gain/(loss) from changes in exchange rates on financial liabilities at amortised cost 5.4 Total net income and gains/(losses) from financial liabilities at amortised cost 5.4 Net other financial income/(expenses) 1 (117.5) (49.8) Total net income from investments 2,162.2 2,823.5 Specifications Interest income and expenses from financial assets and liabilities not recognised at fair value through profit or loss Interest income from financial assets not recognised at fair value through profit or loss 931,0 836,3 Interest expense from financial assets not recognised at fair value through profit or loss (40,1) 1 Net other financial income/expense include financial income and expenses not attributable to individual classes of financial assets or liabilities, and financial administration costs.

gjensidige AnnUAL REPORT 2010 189 21 COntingent liabilities NOK million 2010 2009 Guarantees and committed capital Gross guarantees 0.6 0.6 Committed capital, not paid 705.8 946.0 As part of its ongoing financial management, the Company has undertaken to invest up to NOK 705.8 million in various private equity and real estate investments, over and above amounts recognised in the balance sheet. Investments in private equity and real estate funds totalled NOK 1,303.6 million at the end of the year. The timing of the outflow of capital is dependent on when the funds are making capital calls from their investors. Average remaining operating time for the funds is slightly above eight years and ten years in average including option of extention. As at 31 December 2010 there are contractual commitments regarding reconstruction for lessees amounting to NOK 2.0 million Gjensidige Forsikring is responsible externally for any insurance claim arising from the co-operating Fire Mutuals operations. 22 related party transactions OvervieW OF related parties Gjensidige Forsikring ASA is the Group s parent company. As at 31 December 2010 the following companies are regarded related parties. perspective results Registered office Interest held Ultimate parent company Gjensigestiftelsen holds 61,74 per cent of the shares in Gjensidige Forsikring ASA Oslo, Norway Subsidiaries Fair Forsikring A/S Copenhagen, Denmark 100.0 % Gjensidiges Arbejdsskadeforsikring A/S Copenhagen, Denmark 100.0 % Gjensidige Baltic Riga, Latvia 100.0 % Gjensidige Bank Holding AS Førde, Norway 100.0 % Gjensidige Norge AS Oslo, Norway 100.0 % Gjensidige Pensjon og Sparing Holding AS Oslo, Norway 100.0 % Glitne Invest AS Oslo, Norway 100.0 % Lokal Forsikring AS Oslo, Norway 100.0 % Nykredit Forsikring A/S Copenhagen, Denmark 100.0 % Oslo Areal AS Oslo, Norway 100.0 % Samtrygd Eigedom AS Førde, Norway 100.0 % Strandtorget Drift AS Oslo, Norway 100.0 % Strandtorget Eiendom AS Oslo, Norway 100.0 % Tennant Holding AB Stockholm, Sweden 100.0 % Associates Bilskadeinstituttet AS Oslo, Norway 29.5 % SpareBank1 SR-Bank 1 Stavanger, Norway 10.8 % Storebrand ASA Oslo, Norway 24.3 % Vervet AS Tromsø, Norway 25.0 % Other related parties Fire Mutuals All over the country, Norway Gjensidige Pensjonskasse Oslo, Norway 94.7 % 1 In addition Gjensidige owns bonds in SpareBank1 SR-Bank amounting to NOK 5.0 million. Percentage of votes held is the same as percentage of interest held.

190 gjensidige AnnUAL REPORT 2010 22 related party transactions (COnt.) TRANSACtiOns With related parties InCOMe statement The table below shows transactions with related parties recognised in the income statement. 2010 2009 NOK million Income Expenses Income Expenses Gross premiums written Fair Forsikring A/S including subsidiaries 68.5 Gjensidiges Arbejdsskadeforsikring A/S 13.1 Gjensidige Baltic 8.4 10.8 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 0.2 0.2 Nykredit Forsikring A/S 782.2 Tennant Försäkringsaktiebolag AB (owned by Tennant Holding AB) 8.3 10.7 Change in gross provision for unearned premiums Fair Forsikring A/S including subsidiaries 0.1 Gjensidige Baltic 0.3 Gross paid claims Fair Forsikring A/S 96.7 Gjensidige Baltic 0.7 Nykredit Forsikring A/S 374.5 Tennant Forsikring NUF (branch of Tennant Försäkringsaktiebolag AB) 24.3 Change in gross provision for claims Fair Forsikring A/S 76.2 Nykredit Forsikring A/S 294.6 Tennant Forsikring NUF (branch of Tennant Försäkringsaktiebolag AB) 1.6 22.3 Commissions Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 0.9 2.5 Administration expenses Fair Forsikring A/S including subsidiaries 1.2 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 21.7 9.3 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 8.3 22.5 Gjensidige Pensjon og Sparing Holding AS 10.6 11.8 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 39.5 44.4 Glitne Invest AS 0.1 0.1 Hjelp24 AS (owned by Glitne Invest AS) 4.8 5.4 KommuneForsikring NUF (branch of KommuneForsikring AS, owned by Fair Forsikring A/S) 23.1 Nykredit Forsikring A/S 107.5 Oslo Areal AS 0.2 4.2 0.1 4.1 Tennant Forsikring NUF (branch of Tennant Försäkringsaktiebolag AB) 5.0 4.9 Tennant Holding AB 6.1 1.1 Interest expenses Fair Forsikring A/S 17.7 Total 898.5 811.0 314.2 127.2 Gjensidigestiftelsen has covered part of the expenses related to the stock exchange listing of Gjensidige Forsikring ASA. Expenses related to the conversion of Gjensidige Forsikring BA to a public limited company are evenly divided between Gjensidigestiftelsen and Gjensidige Forsikring. The expenses are charged Gjensidige Forsikring and invoiced Gjensidigestiftelsen. At year end the intercompany account was NOK 34.4 million. Purchase and sale OF assets As per 1 January 2010, Gjensidige Forsikring ASA has acquired all of the assets and liabilities of Fair Forsikring A/S, excluding shares in the subsidiaries Fair Invest A/S and KommuneForsikring A/S, and all of the assets and liabilities from KommuneForsikring A/S. The insurance business in Fair Forsikring A/S and KommuneForsikring A/S is liquidated, and as a result of the transaction transferred to Gjensidige Forsikring ASA s branch in Denmark. The value of the transaction amounts to NOK 1.6 billion. As per 1 October 2010, the Danish branch of Gjensidige Forsikring acquired the commercial and change-of-ownership portfolios from Nykredit Forsikring A/S (Nykredit Forsikring). After this transaction, only the private insurance portfolio remains in Nykredit Forsikring. The transaction was conducted at fair value and amounts to DKK 545.0 million.

gjensidige AnnUAL REPORT 2010 191 22 related party transactions (COnt.) Group COntributions and dividends The table below shows a summary of contributions/dividends from/to subsidiaries. 2010 2009 NOK million Received Given Received Given Group contributions Gjensidige Baltic 21.1 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 74.0 Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 26.8 75.2 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 14.6 44.9 Glitne Invest AS 22.3 18.1 Gjensidige Norge AS 0.1 Oslo Areal AS 101.1 73.2 Strandtorget Eiendom AS 0.1 Tennant Försäkringsaktiebolag AB 1.0 41.6 Dividends Fair Forsikring A/S including subsidiaries 176.3 Oslo Areal AS 104.9 Gjensidige Norge 6.0 Gjensidige NOR Forsikring Eiendom AS (liquidation dividend) 0.2 SpareBank 1 SR-Bank 36.2 Total group contributions and dividends 292.7 41.4 309.5 194.2 perspective results InterCOMpany balance The table below shows a summary of receivables/liabilities from/to subsidiaries, associates and related parties. 2010 2009 NOK million Receivables Liabilities Receivables Liabilities Within the Group Fair Forsikring A/S including subsidiaries 3.5 12.7 Gjensidiges Arbejdsskadeforsikring A/S 13.0 Gjensidige Baltic 3.8 Gjensidige Norge AS 0.1 Gjensidige Bank ASA (owned by Gjensidige Bank Holding AS) 0.8 5.3 74.0 Gjensidige Pensjon og Sparing Holding AS 1.2 (0.2) Gjensidige Pensjonsforsikring AS (owned by Gjensidige Pensjon og Sparing Holding AS) 22.8 10.0 75.2 Gjensidige Investeringsrådgivning ASA (owned by Gjensidige Pensjon og Sparing Holding AS) 14.8 9.5 44.9 Gjensidigestiftelsen 34.4 Glitne Invest AS 22.2 17.9 Hjelp24 AS (owned by Glitne Invest AS) 1.4 1.6 KommuneForsikring NUF (branch of KommuneForsikring AS, owned by Fair Forsikring A/S) 7.4 Nykredit Forsikring A/S 26.2 Oslo Areal AS 80.0 73.2 Tennant Holding AB 11.2 38.7 Tennant Försäkringsaktiebolag AB (owned by Tennant Holding AB) 13.0 41.2 2.8 Tennant Assurance AB (owned by Tennant Försäkringsaktiebolag AB) 0.9 Tennant Forsikring NUF (branch of Tennant Försäkringsaktiebolag AB) 1.4 1.6 15.9 Samtrygd Eigedom AS 1.7 Total intercompany balances within the Group 190.7 57.0 222.7 213.7 Co-operating companies 1 and other related parties Fire Mutuals 190.2 165.2 Total intercompany 190.7 247.3 222.7 378.9 1 Cooperating companies are defined as companies with which Gjensidige Forsikring has entered into a long-term strategic alliance. Guarantees Gjensidige Forsikring is responsible externally for any insurance claim arising from the cooperating mutual fire insurers fire insurance business, see note 21.

192 gjensidige AnnUAL REPORT 2010 23 events AFter the balance sheet Date No significant events have occurred after the end of 2010. 24 Capital ratio NOK million 2010 2009 Equity 20,148.6 19,959.3 Effect of adm.prov., guarantee scheme prov. and Natural perils fund (4,265.4) (3,966.6) Goodwill (1,035.6) (152.0) Deferred tax assets (26.4) (16.4) Other intangible assets (659.1) (235.2) Investment properties, unrealised gains, proportion (209.3) (278.1) Reinsurance provision, minimum requirement (6.4) (5.6) Core capital 13,946.5 15,305.5 45 % of investment properties, unrealised gains, proportion 94.2 125.2 Additional capital 94.2 125.2 Primary capital 14,040.7 15,430.7 Primary capital in other financial institutions (108.6) (108.6) Net primary capital (A) 13,932.0 15,322.1 Assets with 0 % risk weight 3,391.0 4,851.3 Assets with 10 % risk weight 292.6 150.6 Assets with 20 % risk weight 18,267.7 16,603.7 Assets with 35 % risk weight 1.3 2.5 Assets with 50 % risk weight 1,524.4 1,488.6 Assets with 100 % risk weight 31,213.2 28,399.1 Assets with 150 % risk weight 126.7 69.0 Other non-weighted assets Goodwill 1,035.6 152.0 Deferred tax assets 26.4 16.4 Other intangible assets 659.1 235.2 Derivatives 434.5 166.9 Total assets 56,972.4 52,135.1 Assets with 0 % risk weight 0.0 0.0 Assets with 10 % risk weight 29.3 15.1 Assets with 20 % risk weight 3,653.5 3,320.7 Assets with 35 % risk weight 0.4 0.9 Assets with 50 % risk weight 762.2 744.3 Assets with 100 % risk weight 31,213.2 28,399.1 Assets with 150 % risk weight 190.0 103.5 Total risk weighted assets 35,848.7 32,583.6 Weighted reinvestment cost derivatives 119.5 32.8 Primary capital in other financial institutions (108.6) (108.6) Risk weighted calculation base (B) 35,859.5 32,507.8 Capital ratio (A/B) 38.9 % 47.1 % FSAN minimum requirement 8.0 % 8.0 %

gjensidige AnnUAL REPORT 2010 193 25 SOlvenCY Margin NOK million 2010 2009 Net primary capital 13,932.0 15,322.1 Proportion of security provision 1,105.6 1,207.5 Proportion of Natural perils fund (up to 25 % of the Natural perils fund is included) 653.9 597.5 Solvency margin capital 15,691.6 17,127.0 Solvency margin minimum requirement 2,700.0 2,399.3 In excess of requirement 12,991.7 14,727.7 Solvency margin capital in per cent of requirement 581.2 % 713.8 % 26 restricted FunDs NOK million 2010 2009 Restricted bank deposits Source-deductible tax accounts 59.0 57.6 Securities placed as security for insurance operations 13.9 14.8 Deposits placed as security for insurance operations 8.3 Total 81.2 72.4 perspective results 27 shareholders The 20 largest shareholders as at 31 December 2010. Investor Number of shares Owner share in % Gjensidigestiftelsen 308,685,000 61.74 % Folketrygdfondet 12,225,000 2.45 % Credit Suisse Securities Nominee 9,730,483 1.95 % Goldman Sachs Int. - Equity 8,655,305 1.73 % Skagen Global 8,337,000 1.67 % State Street Bank And Trust Co. Nominee 8,022,600 1.60 % Goldman Sachs & Co - Equity Nominee 7,513,210 1.50 % Skagen Kon-Tiki 6,947,000 1.39 % Deutsche Bank AG London Nominee 6,000,000 1.20 % State Street Bank And Trust Co. Nominee 5,675,591 1.14 % Morgan Stanley & Co Internat. PLC Nominee 5,045,750 1.01 % Skagen Vekst 3,300,203 0.66 % Skagen Global ii 3,206,328 0.64 % Morgan Stanley & Co Inc. New York 2,611,286 0.52 % Rasmussengruppen AS 2,540,000 0.51 % DnB NOR Bank ASA 2,460,837 0.49 % Barclays Bank PLC 2,400,000 0.48 % Vital Forsikring ASA 1,998,200 0.40 % Odin Norden 1,912,800 0.38 % Odin Norge 1,882,930 0.38 % Number of shares 20 largest shareholders 409,149,523 81.83 % Total number of shares 500,000,000 100.00 % The shareholder list is based on the VPS shareholder registry as at 31 December 2010. A shareholder list showing the owners behind nominee accounts can be found on page 46.

194 gjensidige AnnUAL REPORT 2010 28 share-based payment In connection with the stock-exchange listing of Gjensidige Forsikring ASA on 10 December 2010 all employees in the Group except for the employees in Gjensidige Baltic were given the opportunity to buy shares in the company. Eligible employees were permanent employees as at 13 December 2010. There were no requirements with regards to position percentage, whether or not the employees had been at work, reported sick or on leaves of absence etc. The offer was also given to employees who received employment clarification money. There are no other terms attached to the stock purchase offering. As at 31 December 2010 the participants have invested 44.8 million in the stock purchase offering. The fair value at the moment of allocation was measured based on the price in the customer tranche versus the price in the employee tranches. The value of the bonus shares was discounted using a discount factor after respectively one and two years. The amount is recognised as wage cost in profit and loss and as other paid in equity in the statement of changes in equity. For every tenth share owned continuously until 12 December 2011 the employees will receive 1.5 bonus shares. If the shares are owned continuously until 10 December 2012 a further 1.5 bonus shares will be awarded for every tenth share. Personnel costs NOK million Note 2010 Stock purchase offering for employees allocated in 2010 18 6.7

gjensidige AnnUAL REPORT 2010 195 declaration from the members OF the board OF directors and ceo Declaration from the Board of Directors and the CEO Today, the Board of Directors and the CEO have considered and approved the Annual Report and the annual accounts for Gjensidige Forsikring ASA, the Group and the parent company, for the calendar year 2010 and as per 31 December 2010 (Annual Report 2010). The consolidated accounts have been prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS) and interpretations, together with the additional disclosure requirements that derive from the Regulations concerning annual accounts for insurance companies pursuant to the Norwegian Accounting Act and that shall be adopted as per 31 December 2010. The annual accounts for the parent company were submitted in accordance with the Accounting Act and the Regulations concerning annual accounts for insurance companies as per 31 December 2010. The Annual Report for the Group and the parent company is in accordance with the requirements of the Accounting Act and Norwegian Accounting Standard no. 16 as per 31 December 2010. perspective results To the best of our knowledge: o the annual accounts for 2010 for the Group and the parent company have been prepared in accordance with current accounting standards o the information in the accounts gives a true picture of the Group s and the parent company s assets, liabilities and financial position and results as a whole as per 31 December 2010 o the Annual Report for the Group and the parent company gives a true summary of: - the development, results and position of the Group and the parent company - the most important risk and uncertainty factors that the Group and parent company are currently facing. 17 March 2011 The Board of Directors of Gjensidige Forsikring ASA Inge K. Hansen Randi B. Sætershagen Gunnhild H. Andersen Chair Deputy Chair Trond Vegard Andersen Hans-Erik F. Andersson Gisele Marchand Gunnar Mjåtvedt Tor Øwre Kjetil Kristensen Mari T. Skjærstad Helge Leiro Baastad CEO

196 gjensidige AnnUAL REPORT 2010 auditor s report

gjensidige AnnUAL REPORT 2010 197 perspective results

198 gjensidige AnnUAL REPORT 2010 Statement by the COntrol COMMittee The control committee has, in accordance with its standing instructions and together with the auditor, actuary, executive vice president group staff and general services, and chief accountant reviewed the Board of Directors report and the financial statements for the year 2010 and the auditor s report for Gjensidige Forsikring ASA and Gjensidige insurance Group. The committee has received all documents and information requested. The committee recommends the adoption of the accounts presented as the financial statements of Gjensidige Forsikring ASA and Gjensidige insurance Group for 2010. Oslo, 18 March 2011 Sven Iver Steen Chairman Liselotte Aune Lee Hallvard Strømme Vigdis Myhre Næsseth Deputy Chairman (Alternate member)

gjensidige AnnUAL REPORT 2010 199 statement by the supervisory board The Supervisory Board s Statement on the Board of Directors Report and the annual parent company accounts and consolidated accounts for Gjensidige Forsikring ASA for 2010 At the meeting of 30 March 2011 the Supervisory Board reviewed the Board of Directors report and the annual parent company accounts and consolidated accounts for 2010 for Gjensidige Forsikring ASA, including the proposal for the distribution of the annual profit. The Supervisory Board recommends that the general meeting approves the submitted company accounts as Gjensidige Forsikring ASA s annual accounts for 2010. perspective results The Supervisory Board recommends that the general meeting approves the distribution of the parent company s profit before components of comprehensive income of NOK 2.590,2 million as proposed by the Board of Directors: Dividends NOK 2.350,0 million Transferred to restricted funds NOK 249.3 million Transfer from other unrestricted reserves NOK (9.1) million The Supervisory Board recommends that the general meeting approves the submitted consolidated accounts as Gjensidige Forsikring s consolidated accounts for 2010 The Supervisory Board recommends that the general meeting approves the Board of Directors report for Gjensidige Forsikring ASA for 2010. Oslo 30 March 2011 Bjørn S. Iversen Chairman of the Supervisory Board

Layout: Per Svaan, Gjensidige PHoto PAGe 40: Gjensidige Foundation PHOTOs OF CEO, THE BOARD ANd THE GROUP MANAGEMENT: Yvonne Holth OTHER PHOtOs: Sverre Chr. Jarild/Morten Brakestad PRINTING: Wittusen & Jensen NUMBER PRINTED: 300

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